HECS Cuts Aren’t Fair — They’re a Handout to the Rich

“HECS Cuts Aren’t Fair — They’re a Handout to the Rich” 

The Australian Government’s decision to introduce cuts to the Higher Education Contribution Scheme (HECS) debt has been framed as a relief measure for students burdened with rising costs of living and escalating student loans. At first glance, this may seem like an act of compassion and fairness. After all, young Australians face housing unaffordability, wage stagnation, and growing intergenerational inequality. Yet, beneath the surface, these debt cuts are not the solution they claim to be. Instead, they risk worsening the housing crisis, reducing government revenue available for vital social programs, and distracting from more meaningful reforms to higher education and student debt policy. 

Unlike student debt in countries such as the United States, HECS debt is uniquely designed to be fair and manageable. Students do not repay a single cent until they meet a minimum income threshold, which as of 2025 is around $51,550 per year. If a graduate never earns above this amount, they are not required to pay their debt at all. In effect, HECS functions less like a conventional debt and more like a graduate tax tied to income. This system ensures that those who benefit from their degree and achieve higher earnings contribute back to the system, while those who do not are shielded from repayment. Cutting HECS debt undermines this fairness by offering relief to all debt holders indiscriminately, including high-income professionals who already have the capacity to pay their loans. It amounts to a subsidy for the relatively privileged, rather than targeted support for those most in need. 

The framing of HECS cuts as a measure to help struggling students masks a deeper inequity. The largest beneficiaries of HECS debt relief are not low-income Australians but middle- and upper-middle-class professionals. Doctors, lawyers, and engineers with large HECS debts but high earning potential will see their liabilities reduced. Meanwhile, those who never earned enough to repay HECS in the first place receive no new benefit, since their repayments were already effectively waived under the income-contingent system. This makes the cuts regressive: they funnel public money to those already on pathways to higher lifetime earnings, while doing little to assist the genuinely disadvantaged. A fairer policy would directly target cost-of-living support rather than blanket debt cuts. 

Moreover, the HECS debt cut is not a structural solution to the student debt problem but a one-off or short-term intervention that leaves the fundamental issues untouched. Students will continue to face rising tuition costs, especially in humanities and law degrees, under the “Job-Ready Graduate” scheme, which deliberately shifted costs onto certain disciplines. Future cohorts will accumulate debt just as quickly, if not more, leaving us in exactly the same position a few years from now. By contrast, real reform would involve addressing the unfair distribution of costs across degrees, rethinking indexation of HECS loans, and adjustments that prevent runaway debt growth. The cuts distract from these more meaningful reforms. 

One of the most politically appealing arguments for HECS cuts is that reducing student debt will make it easier for young Australians to buy a house. Banks, in calculating borrowing capacity, often consider HECS repayments as part of an applicant’s financial commitments, and the government argues that cutting debt boosts borrowing power and brings the dream of home ownership closer. Yet this argument ignores a critical point: housing affordability is fundamentally a supply problem. Cutting HECS debt increases the number of people suddenly able to bid for scarce housing stock. Demand rises while supply remains unchanged, and the result is predictable: higher house prices. Instead of helping young Australians enter the market, the cuts risk pushing prices further out of reach. The beneficiaries, in this case, are existing property owners and investors who see their assets appreciate, while renters and first-home buyers—the very groups supposedly helped by HECS relief- end up worse off. 

Another overlooked consequence of HECS debt cuts is the loss of future government revenue. HECS repayments are not just an administrative technicality; they are a critical funding stream that supports Australia’s education system and broader public services. Cutting debt outright reduces the amount of money that will eventually flow back to the government. This has knock-on effects for the social safety net. Less revenue may mean reduced capacity to fund programs like the National Disability Insurance Scheme (NDIS), Centrelink benefits, and public health initiatives. These cuts disproportionately hurt the poorest and most vulnerable Australians—those who rely most on government services. In effect, the policy trades off long-term social spending in order to deliver a politically expedient, short-term debt cut. 

By choosing politically popular but economically unsound debt relief, the government also sets a dangerous precedent. Future policymakers may feel pressured to repeat such measures for electoral gain rather than pursuing tough but necessary reforms. The result is a cycle of temporary handouts and populist gestures—what economists call “pork-barrelling”—instead of sustainable solutions. The immediate applause masks the long-term costs, both fiscal and cultural, of a state that governs through short-term expediency rather than principled policy. 

Perhaps the most glaring omission from the HECS debate is the failure to address the “Job-Ready Graduate”(JRG) scheme. Introduced in 2021, JRG significantly raised the cost of humanities and law degrees while lowering fees for disciplines deemed in short supply, such as teaching and nursing. The rationale was to “incentivise” students into fields that matched labour market needs. In practice, JRG saddled humanities and law students with heavier debts while doing little to shift enrolments. If the government were truly serious about easing student debt, it would revisit or repeal JRG rather than applying a superficial cut that leaves inequities untouched. The current approach addresses the symptom but not the disease. 

If the aim is to genuinely reduce the burden on students and graduates, better alternatives exist. Indexation could be tied to wage growth rather than CPI, ensuring debt rises only in line with graduates’ ability to pay. Targeted assistance could be provided to low-income graduates struggling with repayments rather than across-the-board cuts. The Job-Ready Graduate scheme could be scrapped or reformed to reduce inequities between disciplines. Housing affordability could be addressed at its source by boosting supply. Fiscal capacity could be used to strengthen social safety nets, which would deliver benefits to those in genuine need rather than providing windfalls to high-income professionals. 

The HECS debt cuts may be well-intentioned, but they are poorly designed and ultimately counterproductive. They fail to address the structural problems in higher education funding, risk fuelling the housing crisis, eroding government revenue, and disproportionately benefiting higher-income Australians. At the same time, they divert attention from meaningful reforms such as revising indexation, fixing the Job-Ready Graduate scheme, and tackling housing affordability directly. In the long run, Australia must resist the temptation of temporary, headline-grabbing fixes and instead pursue policies that balance fairness, fiscal sustainability, and long-term opportunity. HECS is not a broken system in need of indiscriminate cuts; it is a well-designed income-contingent repayment framework that requires careful, targeted reform. To undermine it with politically convenient debt relief is to do a disservice to students, taxpayers, and the most vulnerable Australians alike.