Student loan debt in Australia is projected to nearly double as a share of the economy over the next four decades, placing a growing financial burden on future taxpayers, according to the Albanese government’s latest Intergenerational Report released on Monday. The report highlights concerns about the sustainability of the Higher Education Loan Program (HELP), which allows students to borrow from the government to cover university tuition fees.

Currently, the HELP debt stands at $41 billion, with roughly 14 percent, or about $5.74 billion, unlikely to be repaid due to the income-contingent nature of the loans. This proportion of unpaid debt has risen by about two percentage points since the 2023 report, reflecting changes made in the 2024-25 reforms that increased repayment thresholds and decreased repayment amounts.

Under the HELP system, students can borrow varying amounts depending on their course of study, ranging from approximately $14,000 for degrees in teaching, nursing, mathematics, or social work, up to $70,000 for a four-year law degree. Repayment of these loans begins only when graduates earn above a threshold, currently set at $69,528, with a compulsory repayment rate of 15 percent applied to income exceeding this amount. This threshold was raised from $54,000 last year, which the government says will result in longer repayment periods for some borrowers.

Each year, outstanding HELP debt is indexed by the lower of inflation or wage growth, with a 2.8 percent increase applied in the current calendar year—significantly lower than typical bank interest rates on loans. While this keeps repayment amounts comparatively manageable for borrowers, the government assumes the cost of unpaid interest for graduates who do not reach the income threshold, effectively transferring that financial responsibility to taxpayers.

In addition to concerns about growing debt, the government’s report forecasts demographic shifts that will influence education spending in the coming decades. An ageing population coupled with a declining birthrate is expected to slow growth in Commonwealth education expenditure. Real per capita spending on education is projected to rise only marginally from $1,767 in 2026 to $1,805 in 2046. As a proportion of gross domestic product (GDP), education spending is expected to decline from 17 percent in 2026 to about 11 percent by 2066.

Despite these shifts, the report anticipates an increase in the proportion of the working-age population holding tertiary qualifications, driven by higher educational attainment among younger Australians as older generations retire.

Last year, the government undertook a significant intervention by forgiving 20 percent of outstanding HELP debts for around three million graduates, a policy that cost taxpayers approximately $16 billion and was credited with supporting the Albanese government’s re-election campaign.

The Intergenerational Report underscores the challenge of balancing investment in higher education and fiscal responsibility as Australia faces evolving economic and demographic landscapes.