Costings commissioned by independent MP Monique Ryan have highlighted potential savings for university graduates as HECS debts increased by approximately USD 0.71 billion (AUD 1 billion) on 1 June 2026.
Around 3 million students and graduates are expected to see their HECS debts rise when they are indexed by 2.8%. New costings reveal how much borrowers could save if the government changes the date of HECS debt indexation.
University graduates could save more than USD 2.13 billion (AUD 3 billion) over the next decade if the government changes the indexation date for HECS debts. Ryan has described the current arrangement as a “broken system.”
Approximately 3 million students and graduates experience annual increases in their HECS debts based on either the rate of inflation or the Wage Price Index, a mechanism designed to maintain the real value of the debt owed to the government.
Students make compulsory HECS repayments through the taxation system. These payments are collected and held by the Australian Taxation Office (ATO), but they are not deducted from an individual’s debt until a tax return is lodged. In most cases, this occurs after annual indexation has already been applied.
Costings prepared by the Parliamentary Budget Office and obtained by Guardian Australia examined the impact of shifting the indexation date from 1 June to 1 November, a five-month delay that would allow compulsory repayments to be credited before indexation occurs. The proposal would reduce the government’s underlying cash balance by approximately USD 0.852 billion (AUD 1.2 billion) in foregone revenue over four years.
Ryan, who commissioned the costings, said young Australians are already under significant financial pressure and argued that the system should be made fairer.
She stated that rising student debt is not accidental but the result of deliberate policy decisions made by both Liberal and Labor governments over many years.
Ryan further argued that the system requires urgent reform. She noted that when homeowners make payments on a mortgage, the outstanding balance is reduced immediately. By contrast, HECS repayments are not credited to graduates’ accounts in real time, resulting in higher debts through additional indexation.
Data analysis suggests that first-year students could collectively save approximately USD 41.18 million (AUD 58 million) in indexation costs initially. These savings are projected to increase as university fees, HECS debt levels, and student enrolments continue to grow, reaching more than USD 106.5 million (AUD 150 million) annually by 2035–36.
Australia’s social security payments, including JobSeeker, the Age Pension, Disability Support Pension, Carer Payment, and Youth Allowance, are indexed at different times throughout the year. The Age Pension, Disability Support Pension, Carer Payment, and JobSeeker are indexed twice annually, on 20 March and 20 September, while Youth Allowance is indexed each year on 1 January.
On 28 May, Education Minister Jason Clare said the Labor government had already implemented significant changes to HECS indexation rules in December 2024. Under those reforms, debts are indexed by either the rate of inflation or the Wage Price Index, whichever is lower. The government also reduced HECS debts by 20% following a 2025 election commitment.
Clare said the government had already introduced important changes to the way HECS debts are indexed, providing substantial benefits to young Australians across the country. He acknowledged that while progress had been made, additional reforms were still required.
He also stated that the government wants to make obtaining a university degree both more affordable and faster for young Australians.
If implemented, the proposed change to the HECS indexation date would provide substantial long-term relief for Australian students, generating an estimated AUD 3 billion in savings over the next decade. The proposal reflects growing efforts to make higher education more affordable, reduce student debt burdens, and improve financial outcomes for current and future graduates.
