Young Australians already facing cost of living pressures are being stung by a hidden cost, forcing many to rethink their future.
Worried young Australians are reassessing their future, with student debt balances rising across the country amid cost of living pressure.
Current and former students suffered a frosty start to winter with a 3.9% increase in HECS-HELP debt balances – a significant jump from last year’s 0.6% rate – which is entered into force on June 1.
Student debt balances do not bear interest but are linked to the Consumer Price Index, which measures the cost of living.
Simply put, inflation also applies to student debt and takes effect from June 1 of each year.
Australian Taxation Office records show the indexation rate was 1.9% in 2018, 1.8% in 2019 and 2020 and 0.6% in 2021.
In a cruel blow this week, it soared to 3.9%.
With an average student debt of $23,686 in fiscal year 2021, students were hit with an average increase of $920.
Danial Kazi, an architecture undergraduate, says this comes as a brutal shock to students who aren’t sufficiently informed about how their debt might affect them later.
“It’s super concerning,” the 24-year-old told NCA NewsWire.
“There’s not a lot of education for college students — either by uni or the government — about what that debt looks like.
“It’s kind of like, ‘Take anything, do whatever you want to do.
“You end up racking up all the HECS debt and nobody tells you about the indexation rates, nobody tells you what the repayment will look like or what it’s going to do for your future.”
Kazi says student debt linked to the cost of living becomes problematic when graduate salaries don’t reflect the rising rate of inflation.
“You don’t see that same rate reflected in terms of earnings, opportunities and graduate jobs,” he said.
“It’s not just about trying to pay off that debt. In terms of the cost of living, everything is going up.
The worried student now wonders if a master’s degree will be worth the financial burden after completing his bachelor’s degree.
“Before, I was very happy to finish my baccalaureate and go directly to the master’s,” he explains.
“Now I think I’m going to have to work, and maybe after working for a few years I could go on to master’s.”
Government relief in the form of the recent fuel excise duty cut would reassure students of their value as future contributors to the economy, Kazi suggested.
“As far as fuel prices are concerned, we have had a fuel tax reduction. I don’t understand why this can’t translate to our HECS refunds,” he said.
“The whole point of an education is to be able to contribute to the economy, so in my view it is in their interest to provide support in that regard.”