By Natalie Haddad | 21 July 2023
Yes, you may be wondering “Aren’t HECS-HELP debts supposed to be interest-free?” The answer to that question is yes, but the debt is indexed each year to align with inflation which means that every year when the Consumer Price Index (CPI) increases, the Australian Taxation Office (ATO) will increase the amount you owe on your HECS-HELP in line with the rate of inflation.
For example, as the 2023 indexation is now 7.10% and suppose you owed $80,000 on your HECS debt, this means you would now have to pay an additional $5,680 extra on top of what you owe.
Law graduates' tuition fees will also increase to $17,483 per annum while their total HECS debt will accumulate faster than ever each year.
While the loan limit is capped at $113,000, the Australian Taxation Office (ATO) publicised that a former student accrued a HECS debt of $737,000. Another former student accumulated a HECS debt of $495,990 following others owing the Australian Government just over $300,000.
Law students’ affected by price indexation face an increase in the cost of living and housing prices that they will struggle to repay. According to the Australian Bureau of Statistics, there are over 3.1 million Australians who have a HECS-HELP debt, totalling around $80 billion owed to the Australian Government.
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| Graph: The above graph shows the change in the wage price index compared to the change in inflation (CPI) since January 2014 to March 2023. Source: Australian Bureau of Statistics |
Amid the current cost of living crisis, most law students who are already struggling to afford basic necessities such as food, clothes, accommodation, transportation and textbooks are now burdened with more money to pay towards their HECS debt after they graduate.
According to the National Tertiary Education Union it will take male students 32 years to repay their student loan, and for female students, 36 years. This reflects the disproportionate impact that indexation will have on women across not only the law sector but all sectors, as the gender pay gap also persists.
Lenders take HECS debts into account when assessing personal loans and mortgage applications and with housing prices increasing, the HECS-HELP indexation will adversely affect a graduate lawyer’s ability to buy their first home while they struggle to repay their HECS debt at the same time.
Advice for Law Students and Graduate Lawyers:
- If you are a first year law student on HECS ask yourself if law is really a career you want to pursue keeping in mind that you are setting yourself up with a huge debt that is increasing every year even after you graduate. Also remind yourself that the idea that "lawyers make a lot of money" is a myth and that the average starting annual salary is $55,000.
- How are you going to keep supporting yourself while you complete your law degree? Is living on Centrelink's Youth Allowance or Austudy really enough to support yourself while you complete your degree? Can you manage getting a part-time job while making time for study, preparing for exams, completing assessments, having free time and other commitments?
- How will having a HECS debt accumulating a high indexation every year going to affect your plans for the future after you graduate? Will a high HECS debt affect your ability to buy your first home? Do you plan to start a family? If so, will you have enough to financially support yourself and your family? Finding a job after you graduate will not be easy and for law being a very competitive industry, you will be faced with many challenges when looking for work, especially when most firms prefer applicants who have at least 3 years post admission experience (PAE).
- If you are in your third or final year of law, start looking for scholarships you are eligible for, fix up your resume and look for work experience to build your skills to prepare yourself for any work opportunities when you graduate. It won't be easy landing a job with no post admission experience but at least you give employers an idea that you are keen and have some experience to at least get your foot through the door.
- Most importantly - don't panic! Your mental health and wellbeing is more important. Take time to relax, find out from your university if you can take a break from studies. You can use this time to work and earn extra money or even just go for a holiday. Reach out to student welfare services available at your university and have a chat with a counsellor if you are going through any personal problems or financial difficulty. If you have recently graduated, reach out to your university's careers advisers; they can help you if you are stuck, help you with connecting with job networks or even to match you with graduate work opportunities if you're lucky.