Tens of thousands of Canberrans could get relief from HECS burden

More than one in five employed people living in the ACT - 56,686 taxpayers - had a HECS debt in 2022-23, including at least 5284 people earning $100,000 a year or more, with these debts set to rise between 4.2 and 4.8 per cent this financial year according to Parliamentary Library modelling provided to the Greens.

This includes more than 21,000 people earning below the $51,500 annual income threshold that makes repayments mandatory.

For people with an average HECS repayment balance of $26,494, their loan would grow by between $1113 and $1272, which would come as an additional shock after last year's 7.1% indexation added about $1700 to the average debt.

Mr Albanese on Thursday singled out student debt as an area of focus just weeks out from the May 14 budget, telling Sydney radio station KIIS FM: "There's a range of areas where we need to do much better with the younger generation ... and HECS is one of them."

The Prime Minister said the February report of the Australian Universities Accord, which the government established in fulfilment of an election promise, was that "the system can be made simpler [and] fairer".

"We want to encourage more people to go to university," Mr Albanese said.

Greens education spokesperson Senator Mehreen Faruqi said students debts were "spiralling out of control" and that the Labor government "must scrap indexation" of HECS, saying amounts owed were on track to increase by $12.3 billion or 16 per cent in Mr Albanese's first term.

HECS debts increase each year in line with cost-of-living changes as measured by the consumer price index (CPI), meaning indexation has dramatically increased with inflation.

The Universities Accord report recommended ensuring the indexation of HECS debts did not outpace wage growth by setting the rate to whichever was lower of the consumer price index and the wage price index.

Independent MP Monique Ryan has collected more than 260,000 signatures on a petition calling for that reform. Fellow crossbenchers Zoe Daniel, David Pocock, Allegra Spender and Kylea Tink have also backed reforms.

ANU professor of economics Bruce Chapman, who devised the HECS student loan scheme introduced by the Hawke government in 1989, defended it as fundamentally sound - but said it could be be improved with some tweaks.

"People really shouldn't be scared," Professor Chapman said.

He favoured adapting his HECS scheme so that student debt was indexed every three months - instead of once a year "which I think is a problem".

The once-a-year change made the indexation hikes seem harder to bear, with the inflation further exacerbating the pinch.

"We haven't had inflation for 20 years," he said.

Professor Chapman also backed linking HECS indexation to the lower of either wages or prices.

And he suggested that the government should do a better job of explaining the HECS scheme.

One common misunderstanding, he felt, was that graduates who failed to repay their student loan would find their credit rating damaged, and so be unable to borrow money.

But he said that the ATO did not go after people who fail to pay regularly.

If, for example, a person left the workforce to look after children or care for aged parents, his or her debt repayments would be suspended. The debt wouldn't vanish, but there would not be an aggressive attempt to reclaim it as there is in the United States.

Education Minister Jason Clare said the government would respond to the Universities Accord recommendations shortly.

"In the years ahead, we need more people to get a crack at going to uni and TAFE," Mr Clare said.