Can students get out from under their mounting debt and move on with the next phase of their lives? Photo: Andrey Popov.
A decade after I graduated, and thanks to the Labor Government’s generous 20 per cent HECS reduction, I now owe precisely the same amount of money on my student loans as I did the day I walked off campus for the last time.
This is an exciting milestone to reach as I prepare to take maternity leave.
Lest you think I’ve shirked my repayments, I took the first full-time job that was offered to me after I graduated, and I’ve worked full-time ever since.
I didn’t crack the income repayment threshold for the first year or so, but other than that I’ve diligently forked out however much of my income the government deemed I should pay them back each year.
When I was in high school, we were told that student debt was “good debt” because it would help us get good jobs and wouldn’t accrue interest, so we could pay it off quickly.
Let me pause a moment to laugh in indexation.
At the time I bought it hook, line and sinker.
I’ve never had any other debt – not a credit card, car loan, or mortgage (despite the spiel about “good debt” in high school, banks do not like lending to people who already owe the government a large amount of money).
I’ve accepted that unless I score a decent financial windfall, HECS will likely be something I have forever.
For the rest of my working life I’ll take home less in each pay packet than I would if my HECS were paid off, and watch it magically balloon back out beyond my reach.
If I take time off work to have kids, or if I don’t go back to full-time work ASAP after having them, that debt will continue to rise faster than I can repay it.
These are all personal problems, the consequences of my personal choices.
But as the Australian birth rate continues to decline, it’s hard not to draw a connection.
About half of my generation studied at university, significantly more than any of the generations before us.
That’s partly because essential jobs you used to be able to get qualified for at technical colleges, such as teaching, nursing or journalism, became part of the university system.
Say you graduated at 18 and knew what you wanted to do straight away. You lived in a regional area, so you took a year or two to work and build up the savings you needed to move to the big smoke and study.
If you did a three-year degree and passed everything on the first go, you graduated at 22 or 23.
ATO data shows Australians in their 20s with a HECS debt in 2005-06 owed an average of $12,557; rising uni costs and inflation means the average HECS debt held by people in their 20s is now about $30,000.
You don’t earn enough to start HECS repayments with your first full-time job, but you keep at it and start to pay that debt back at 24 or 25, when it’s snuck closer to $40,000.
You know it’s not responsible to have kids until you’re financially secure, and you know being financially secure in Australia means owning your own home.
Home loan approval means paying down your debt, and it’s tough to save for a deposit when you lose an extra chunk to the tax man each week.
After a couple of years you notice your debt hasn’t really budged – indexation is so close to your repayments some years the balance goes up instead of down.
Luckily you’ve been healthy and made progress in your career. You still live in a share house, so you decide to really knuckle down and make extra repayments.
If you can pay off $10,000 a year you should be able to have it paid off in five years, even with indexation.
You’re 32 by then, and while you’ve got no debt you haven’t got much of a house deposit either. That’s OK though, you can reallocate the money you were putting towards your HECS.
If prices don’t climb too high you should be able to afford a five per cent deposit on an apartment by the time you’re 35.
This is the best-case scenario – if you get sick, or lose your job, or have kids, it’s easy for that debt to spiral perennially out of reach.
I’m not an economist. I don’t know what levers can and can’t be pulled to change the financial landscape.
But I do know that saddling young Australians entering the workforce with a huge debt isn’t going to improve our birth rates.
