Graduates will be the worst affected by the largest student debt indexation in 32 years.
The student debt indexation rate could double from 3.9 to 8 per cent when reviewed in June 2023, according to ANU professor of higher education policy, Andrew Norton.
"We won't know the final increase until the March inflation numbers are released," Professor Norton.
"But I'm estimating it will jump to seven or eight per cent," he said.
The HECS-HELP indexation rate is 3.9 per cent, set in June 2022.
That is a jump from 0.6 per cent in the year before.
"It's demoralising to realise you've made repayments, but your debt might have gone up in total," he said.
How does student debt indexation work?
HECS-HELP debts do not accrue interest, but they are affected by student debt indexation which is applied yearly on June 1.
The indexation increases will not affect on what is paid in a given year, but it will affect the length of repayments over the course of the loan, Professor Norton said.
That means as years go by, "there is indexation on the indexation", Professor Norton told ACM.
When 3.9 per cent indexation was applied last year, the average HECS-HELP debt was just short of $24,000.
Student loans index alongside inflation, meaning the debt amount increases but the "real value of the debt stays the same", Australia Institute research economist Eliza Littleton told ACM.
Ms Littleton said there's a problem with indexing debt to inflation.
"The wages Australians are using to make repayments are not rising in-line with inflation," she said.
With wage growth falling behind, indexation is making loans larger, making them harder to repay, Ms Littleton said.
Monash arts and commerce graduate Berenice Mickelburough is now looking back on the student debt she has accrued.
Ms Mickelburough said HECS-HELP debts were briefly explained when she enrolled, but the potential for it to rise in line with inflation was not covered.
"The main thing you hold onto is 'I don't have to worry about this money now? Great!'" she told ACM.
"You do it hoping the degree will get you somewhere, but there's no guarantee that you're going to get anything out of it."
"It's a big kick in the guts," she said.
How do wages play a part?
"We know that real wages are going backwards," Ms Littleton said.
Australia's purchasing power is shrinking, with the country experiencing the worst drop in "real wages in 30 years", Ms Littleton said.
Collective bargaining power is weak for Australian workers, meaning wage growth is likely to remain sluggish, she said.
"The government could support higher wages by encouraging an increase to the minimum wages and award rates," she said
"What really matters, when a person is paying back a loan, is how much their wages are increasing," Ms Littleton said.
A federal Department of Education spokesperson told ACM, "People experiencing hardship are able to apply to the ATO to defer their repayments."
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"The HELP scheme does not require a person to make a repayment until they are earning above the minimum repayment threshold."
"HELP reduces the upfront barriers to education allowing people to find better employment and increased wages," the spokesperson said.
Repayments are calculated based on income, "if your wages stay the same, you'll probably drop back a repayment band," ANU's Professor Norton said.
"Which means you have more money in your pay, but also means you make lower repayments, so there's more debt left to index," he said.
What does this mean for recent graduates?
Recent graduates, who are yet to join the workforce or employed in lower earning positions, will have a larger HECS-HELP debt, Professor Norton said.
The larger the debt, the more indexation adds to it, he said.
"Graduates have accumulated all this debt."
"But because they're early in their careers, they're yet to make significant progress on repayments," he said.
In absolute dollar terms, those leaving university will see the highest indexation, Professor Norton said.
"It's the same percentage for everyone, but it's a larger dollar amount for recent graduates," he said.
Professor Norton said making a repayment before the midyear review will reduce the overall burden of debt.
"If you can make an early repayment, at least a week before June 1, that will reduce the amount of debt that will be indexed," he said.
"Policy makers are doing what they can to push inflation back down, whether they'll be successful remains to be seen," Professor Norton said.
Ms Littleton, from the Australia Institute, said students should not be responsible for the financial barriers imposed by rising inflation.
"The impacts of indexation are particularly felt by lower socioeconomic students and those working in lower paid fields."
"Everybody that wants to study tertiary education should be able to and finance shouldn't be a barrier," she said.