Students used to accept Higher Education Contribution Scheme debts, and other student loans, without much thought.

Two things changed that.

The first was indexation. HECS loans are interest-free but indexed annually on June 1, using a CPI-based formula to ensure they maintain their real value over time.

In 2023 and 2024, high inflation meant the total owed by Australian graduates increased from $67 billion to over $81 billion.

Insult was added to injury by the fact that the tax office collects HECS payments throughout the year but doesn’t adjust the balance owing until tax returns are filed – after indexation is applied.

Graduates who think they’ve paid their debts off have been handed further debt at tax time.

Second, in 2020 the Morrison government lowered the threshold income for repayments, while doubling the price of many degrees – including arts, law and business.

That lower repayment threshold means that a single parent with two children and an income between $48,000-$100,000 loses up to 70 cents of every extra earned dollar to reduced family benefits and increased tax, Medicare, and HECS repayments.

At a time of low unemployment and dwindling productivity, Scott Morrison created disincentives to increased female participation in the workforce.

His Job-Ready Graduates program doubled the cost of arts and law degrees to $51,000 – double degrees are $85,000.

This failed attempt to steer students to STEM and nursing degrees left some with debts vastly disproportionate to their future earning potential. Its economic effect has not yet been fully realised but will play out over decades.

Virtually all economists agree it’s a flawed and ineffective policy.

Domestic enrolments in Australian universities have plateaued. Dropout rates are historically high.

Graduates now have average debts of about $27,000 – this will increase steeply as the Job-Ready Graduates scheme manifests.

Already almost 60,000 Australians have HECS debts of more than $100,000.

Time to repayment is increasing – more than 200,000 Australians in their 50s have HECS debts, more than 80,000 in their 60s.

Women take longer and end up paying more. Female-dominated courses like psychology are floundering. We need more mental health professionals.

It costs as much as $90,000 to become a clinical psychologist – a process that includes up to 1000 hours of unpaid practical placements.

In late 2024, Parliament legislated to relieve students of much of the burden of recent HECS indexation by capping it to the lower of CPI or WPI – a change retroactive to June 1, 2023 – which resulted in refunding of $3 billion in HECS debt.

This happened in response to the recent Universities Accord, but also as a result of the increasing anger expressed by the 2.9 million Australians with HECS debts. Some 288,000 of them signed my 2024 petition calling for changes to indexation.

Education Minister Jason Clare has long acknowledged that the Job-Ready Graduates program must go, but he has deferred changes to the fledgling Australian Tertiary Education Commission – which won’t be fully operational until 2026, meaning fee changes are unlikely before 2027.

We need to address the cost of education while avoiding inflationary measures. This week the government will lodge legislation for a 20 per cent reduction in outstanding HEC debts, an increased repayment threshold and a change to marginal repayments.

The reduction of student debt is a populist move that no doubt helped the Albanese government win the recent election, but it will benefit future high-earners more and help recent graduates to a much greater extent than those who completed degrees a few years ago.

The government should act immediately. In this parliamentary term, it must change the timing of HECS indexation. It must repeal the manifestly unfair recent increases in the cost of arts, humanities and business degrees.

It must stop taxing stipends of part-time research students, and it should extend placement support to all care-sector professions.

I’ll move amendments to that end next week; the government has the choice to accept them, and the opposition to stake its position.

It’s in no one’s interest for the HECS system to remain broken. In the face of considerable pressure, the government is taking small steps to fix it. It must do more – and quickly. The young people of Australia are watching.