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When compared with countries like the US,Australians have often felt pretty chuffed about our student loans system. HECS,devised in 1989 − and known as HECS-HELP since 2005 − has long been considered a relatively fair scheme,to the point where many advocates label it as “the best debt you can have”.

Australia has a pretty good student loan scheme,but it’s affected by inflation.Michael Howard

Of course,the best debt is no debt (looking at you,Baby Boomers who had the benefit of free uni),but all things considered,HECS-HELP is pretty good. There’s no interest charged on the loan,you don’t have to pay it off by a certain deadline,it’s written off on your death,and the repayments increase only as your salary does (and remain quite low).

What’s the problem?

However,the one thing HECS-HELPdoes do is increase in line with inflation,which was all fine and dandy when it was around 1 to 2 per cent. But the whopping 7.1 per cent rise last year,and the predicted 4.8 per cent rise this year,mean HECS-HELP balances are ballooning,in some cases effectively wiping out any progress workers had made paying down their debt.

A household with a $500,000 mortgage is paying $1134 a month more on its mortgage than it was in May 2022.

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There are just shy of 3 million people with outstanding HECS-HELP debts,with an average balance of around $26,000. The total value of HECS-HELP debts reached $78 billion last year,up $4 billion from 2022.

What you can do about it

Changes to HECS-HELP are slated to be announced in the federal budget this month,and Prime Minister Anthony Albanese has flagged the system will be made “simpler and fairer”. Meanwhile,here are some things to consider if you want to get your HECS-HELP in order before the expected June hike:

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.