HECS and home loans: the hurdle for university students

"I've accepted that home ownership might be difficult or just out of reach - I don't have much of a choice," he said.

"I think there is a general feeling of resignation and apathy about the 'Australian dream' among students."

New research from Compare the Market has revealed more than a quarter of Australians with a HECS-HELP debt have been impacted in their borrowing power to buy a home due to their HECS debt.

The federal government has announced that HECS will be indexed by the lower of the WPI or the CPI, but what does this mean for the amount you owe?

Due to indexation, HECS debts were tipped to increase by 4.7 per cent on June 1 based on the Consumer Price Index (CPI).

"I didn't realise that HECS is indexed each year just prior to our held earnings being paid off after doing our tax return. I believe this should be indexed after the annual contribution is paid off," Lucy* said.

Compare the Market's Economic director David Koch said the "cruel increase" can set the average HECS loan back by more than a thousand dollars.

"And these aren't things people factor in when taking out student loans in the first place," he said.

"When a bank looks at you if you're seeking a loan, they look at anything that is going to affect your repayments," he said.

Mr Hyslop said while there's some Government relief with the wiping of some student debt, degrees are still very expensive.

"I think there is a general feeling of anxiety among students about purchasing a home and paying back HECS debt. It's concerning that we might not have the same financial freedom as our parents."

HELP debt is a very low-risk debt, but it can also negatively affect your borrowing power, Mr Koch says.

When Lucy embarked on her university degree, she had no idea what she was really signing up for.

It was an exciting time in her life being in her early 20s, studying a Bachelor of Business in 2012 and transferring to a Master of Business Administration.

Over the course of the next six years she racked up almost $40,000 in HECS-HELP debt. The average student HECS debt in Australia is currently $26,494.

At the time, she didn't realise the impact it was going to have on her future.

"I didn't give it much thought at all and I also didn't realise it would affect buying a home or have any awareness of how HECS would impact my overall financial situation," she said.

At 31 years old Lucy found herself wanting to purchase land and property in the Hunter Valley to build a house to live in with her two children.

But it wasn't as easy as taking her savings deposit and asking for a loan.

"HECS repayments reduced my disposable income, which affected the amount I qualified to borrow for my mortgage. It also influenced the lenders decisions based on my existing financial obligations," she said.

"I was concerned I wouldn't be able to borrow the amount I needed."

Now living in her home at 34-years-old, she is grappling with HECS and mortgage repayments in the midst of the cost-of-living crisis, while supporting two children on her own.

Lucy, who requested anonymity to discuss the specifics of her situation, had to turn to family members for financial help to secure the amount she needed.

"I had to borrow $5000 from my parents so that I had a larger deposit and could borrow within my capacity," she said.

"Circumstances change in life and HECS repayment doesn't consider that."

She made the decision to borrow against her house to pay off her study debt.

"I wasn't able to afford to pay off my HECS debt and also pay my mortgage. I needed to borrow against my home to pay it off," she said.

"And because I have gripes about how HECS is indexed just before our held earnings are paid off for the financial year, I just wanted to get rid of it."

Lucy said she had always wanted to continue further study, but a large study debt would not be feasible.

"I had always wanted to continue to do further study, however given HECS and the repayments, I will not be able to afford to."

Despite her HECS hurdles, Lucy still believes tertiary education is crucial in allowing people to contribute meaningfully in society, but says it's important to understand how HECS works.

"Saving for a deposit becomes especially important, as HECS repayments may limit your ability to accumulate savings," she said.

"Seek advice from a financial adviser and consider government support or incentives available for first-time buyers, which could help alleviate financial pressures associated with both HECS and property ownership."

With nine out of 10 jobs requiring a tertiary education, University of Newcastle Deputy Vice Chancellor professor Mark Hoffman said a university degree continues to be a valuable investment in a person's future.

"By obtaining a university degree, our students develop skills and knowledge which enhance their career opportunities, leading to on average higher lifetime earnings and greater job satisfaction," he said.

"We [also] have a range of financial support options available to help students during their placements, including scholarships, grants and emergency vouchers."