Independent MP Monique Ryan has introduced a bill in federal parliament proposing to change the date on which HECS debts are indexed. According to costings from the Parliamentary Budget Office (PBO) commissioned by Ryan, the change could save Australian graduates over $3 billion over a decade.
"Graduates' payments are not accredited in real time, causing financial costs." — Monique Ryan
Current Indexation Process
Under the current system, HECS debts are indexed annually on 1 June (some reports state 1 July) to maintain their real value. The indexation rate is based on either the rate of inflation or the wage price index, whichever is lower, following a change implemented in December 2024.
On Monday, HECS debts are scheduled to be indexed by 2.8%, increasing total debt by a combined $1 billion across approximately 3 million borrowers.
Compulsory repayments are collected by the Australian Tax Office throughout the year but are not credited to the borrower's debt until after they file their tax return. This process occurs after the indexation date.
Proposed Change
Ryan's bill proposes moving the indexation date to 1 November. This would allow compulsory repayments made during the year to be applied to the principal before indexation is calculated.
The PBO costings estimate that the change would result in:
- $58 million in savings in the first year
- Over $150 million per year by 2035–36
- Total savings of $3.2 billion over 10 years
The proposal would reduce the budget's underlying cash balance by $1.2 billion over four years due to forgone revenue.
Stakeholder Positions
Monique Ryan described the current system as "broken." She noted that she asked Education Minister Jason Clare about the issue in the House of Representatives but received no timeframe for action.
Education Minister Jason Clare acknowledged the issue, referencing previous changes including indexing to the lower of CPI or WPI and a 20% debt reduction promise made during the 2025 election campaign. He said there is more work to be done.
The bill is supported by Universities Australia and the National Union of Students, citing cost-of-living pressures on students and graduates.
"Reducing unfair debt pressures is a meaningful step." — Luke Sheehy, Universities Australia CEO
"Charging indexation on debt that has already been repaid is unfair. Delaying indexation is a common-sense reform." — Felix Hughes, National Union of Students president