DENY DENY DENY Why are students not looking at their HECS debt? No, it’s not just young stupidity

On Tuesday, we headed over to UNSW to ask one burning question to uni students:

How much is in your HECS?

Sure, we might be a little nosy. More importantly, though, we wanted to see just how aware (or stressed) students were about their HECS debt. We also were curious as to how long current graduates expected to take to pay off their loans. All was going to plan, until one minor problem popped up:

No one had actually looked at their HECS.

Yes, not a single person could tell us how much debt they’d racked up during their studies. Because of this, none of them had any idea when they’d be able to pay it off, either. The only response we were fed was the classic, existentially beautiful of “ignorant bliss.”

In other words, students were in total denial that they likely owed tens of thousands of dollars to the government. What started as a trivial question suddenly led to a bigger one.

Why was this actually the case?

Extended tertiary education

The ability to study at Australian universities without any upfront payment is a massive win. It’s not a perfect system, but HECS is leagues ahead of some of our Western peers, like the US. It’s a rare policy that prioritises merit based admissions, and this level of accessibility is what has historically encouraged many people to go to uni in the first place. In 2022, over 50% of Australians had a Bachelor’s Degree. While COVID played a factor in this, these figures run rings around the average of 35% in the US and UK.

This sounds great, but it’s also easy to see how the system can get compounded by the pressures of a competitive workforce. The result? Students are frequently advised to do double degrees, or some other form of extended tertiary study, to give themselves a better shot at employment after graduation. Since it costs basically nothing upfront, why not go for it? The data even shows doing so might boost employment chances by up to 40%. Adding another degree, honours, masters, or diploma is no longer exceptional. It’s expected.

What this creates is a new breed of uni students who aren’t sticking around for three or four years. They’re staying longer and racking up way more HECS. What used to be a $20,000 debt is now $70,000, and young graduates are left wondering what to do about it.

HECS indexation

What you’ve more likely heard in the news recently is the indexation of HECS debt. A policy designed to keep debt in line with general inflation shouldn’t be an issue, but in today’s economy, it is. HECS used to adjust annually based on the Consumer Price Index (CPI). While historically that might have meant a 1% increase, the sky-high inflation rates we’ve seen post-COVID has turned the system into a monster.

Recent data shows that graduates earning $65,000 or less a year are actually seeing their debt grow, despite making repayments. Simply put, it’s becoming impossible to keep up repayments with the rising indexation rate. What used to be an interest-free loan to get your foot in the door has turned into a massive burden on young graduates. Even with the reforms currently in Parliament, indexation will still play a significant factor in repayment burdens, particularly for those entering graduate roles with lower salaries.

The moral of the story

There are plenty of reasons why someone might choose to ignore their debt. And while ignorance is bliss, I think it’s shortsighted to wholly attribute students’ denial to this.

Graduates in the ’80s benefited from free education. Today, 19-year-olds are looking at the reality of finishing uni with up to $100,000 of debt. Most people in their right mind would rather forget about it while they can, especially when their main source of income is a babysitting gig twice a week.

In other words, understanding the gravity of that burden isn’t just a scary thought we’d rather ignore out of immaturity. It’s a reality that, if seriously faced upfront, would almost certainly stop people from enrolling in the first place—or from going for that second degree.

Ask me? Without a doubt, ignorance is working overtime to prop up university enrolment rates. At the end of the day, it’s only a matter of time before the penny drops, and 18 year old Joe Bloggs decides its more financially viable to drop out and become a self-taught crypto investor.