Pilot’s $140,000 HECS debt shows why Australians are so fed up

An Australian pilot has sharply criticized the country’s HECS system, calling it a “form of punishment” for young people seeking higher education.

Many young Australians are furious this week as 2.9 million people were hit by a brutal increase in their debt following the indexation of their student debt on Saturday.

While no interest is charged on HECS-HELP debts, they are adjusted for inflation every year on June 1. The debts of those affected rose by a remarkable 4.7 percent last week.

Previously, debt had risen by a staggering 7.1 percent last year – the largest increase in 30 years.

Mark* is one of millions of people affected by the relentless indexation: the 29-year-old’s debts rose by a whopping $6,333.95 over the weekend.

The young pilot currently has a HECS debt of US$141,0999.01 to pay off, and he fears that with an annual salary of US$52,000 he will never be able to pay it back.

In 2018, the New South Wales resident completed a $97,000 Diploma of Aviation. In 2022, he completed an Advanced Diploma of Aviation at TAFE NSW.

Speaking to news.com.au, he revealed that due to the “low income” of some pilot jobs, he was only able to start paying off his debts in the last 18 months.

According to the Holmes Institute, pilots who have completed their academic training often work as instructors while completing their flying hours. The average salary for these positions in Australia is around $59,600 per year.

According to SEEK, the average annual salary for full-time pilots in Australia is between $100,000 and $120,000.

HECS repayments will not be deducted from an individual’s income until they reach the mandatory repayment threshold, which is $51,550 for the 2023-2024 tax year.

“Unfortunately, for most students pursuing a higher education, a government loan is the only way to finance their studies,” Mark said.

“The student loan system is no longer helping Australian students.”

The graduate claims that the HECS system has now become a “form of punishment” for those seeking higher education.

He said indexing was pointless and “discouraged and demotivated people from studying and pursuing education.”

The Australian Federal Government recently announced a plan to cancel three billion dollars in student debt for nearly three million Australians.

The proposed change, included in the May budget, will require the lower of the Consumer Price Index (CPI) or the wage price index to be used in the indexation process. Currently, indexation is based on the CPI.

For the change to come into effect, legislation still needs to be passed – which won’t happen until later this year. However, once that happens, the change will apply retrospectively to 1 June 2023 and the revised indexation rates will be automatically added to citizens’ loans by the Australian Taxation Office.

This means that the indexation will be reduced from 7.1 percent last year to 3.2 percent and this year to 4 percent instead of 4.7 percent.

However, many people are unimpressed with the changes, claiming that they do nothing to solve one of the main problems with indexing.

While payments on your HECS debt are deducted from your salary in real time, this money is not deducted from your debt at the same pace.

Instead, the Australian Tax Office will hold these funds as a credit until you file your tax return on or after 1 July.

However, since indexation takes place earlier, on 1 June, the higher index rate will actually be applied to your previous contributions, even though they will be deducted from your salary much earlier.

This means that the potentially thousands of dollars in repayments that Australians make each year essentially have less impact on reducing their HECS debt due to the unusual timing of indexation.

HECS debt can also affect young Australians looking to buy their first home.

Mark claimed that his high levels of debt made it “almost impossible” for him to enter the property market.

“My HECS debt significantly reduces my credit rating with the banks. There is no relief anywhere, no way to get ahead and no incentive from the Australian Government to undertake vocational training,” he said.

“My student loan is a solid down payment on a house, and with indexing adding thousands of dollars each year, I’ll never be able to pay it off in full.”

Since Saturday, Australians have been expressing their outrage on social media over the renewed increase in their debt.

An X user with the username @amaegazooma shared a screenshot of her debt and revealed that it had increased by $5,928 and was now at $132,071.

Another user, @laterkatersays, revealed that she has paid $31,480.89 towards her HECS debt over the past eight years.

“During that time, the total balance has only decreased by $19,624.39. And all the baby boomers who got their education for free are wondering why we can’t afford a down payment on a house,” she wrote.

Another college graduate announced that his debt had increased by $1,400 and wrote, “Why are we punishing people again for pursuing an education?”

One social media user claimed that at least $14,000 of his $70,000+ HECS debt was the result of indexation.

“If I earn $100,000 every year (big if!) and do not start further studies…assuming an indexation of 3 percent, I will have paid off my HECS program in 2040, i.e. by age 50,” they said.

*Name has been changed for privacy reasons

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