Albanese hints at changes to student debt indexation

Changes to how higher education debt is indexed could be on the cards, Prime Minister Anthony Albanese has flagged.

The indexation of higher education loans, or HECS, is set to rise between 4.2 and 4.8 per cent from June, projections from the Parliamentary Library commissioned by the Greens revealed.

"The idea of HECS is a good one, it's one that has led to a massive expansion [in] the number of people being able to do university degrees," Mr Albanese told radio station Hit Central Queensland on Thursday.

"But we're examining the recommendations and we'll be making announcements pretty soon on that."

For the more than three million people with HECS debt, the indexation is the second-highest in the past decade, behind a rise of 7.1 per cent in 2023.

Indexation is the annual process whereby the government increases HECS debt to keep it in line with inflation.

The Parliamentary Library figures showed that since 2022 student debt levels had grown by 16 per cent, or $12.3 billion.

Changes to HECS indexation were recommended as part of a review of the higher education sector, also known as the university accords.

The review, released in February, called for indexation to be tied to inflation or the wage price index - whichever was lowest.

It also recommended indexation of loans be made fairer and simpler.

Mr Albanese said dealing with student debt was an area that needed to be addressed.

"There's a range of areas where we need to do much better with the younger generation, basically, and HECS is one of them," he said.

But Greens Leader Adam Bandt has called for indexation to be put on hold ahead of May's federal budget.

"So many people are now doing the right thing. They've gone to university, they've done what's been asked of them," he told reporters in Melbourne.

"And yet still, their debt is rising faster than they're able to pay it off.

"There's something Labor can and must do in the upcoming budget and that is pause indexation so that student debts don't keep rising."

Greens education spokeswoman Mehreen Faruqi said debt levels had contributed to the significant cost of living pressures on students.

"This alarming trajectory shows a clear failure of the current system and demands immediate action from the Labor government, no more kicking the can down the road," she said.

"Even the 'best case' scenario will see student debts increase by a whopping 4.2 per cent this year alone, adding $1000 to average debt, which already takes years to pay off."

An undergraduate Bachelor's degree in Australia costs between $20,000 to $45,000 a year, on average.

Australian Associated Press