HECS/Help debts are rising for millions of Aussies
Millions of college graduates will be hit with an extra $1,500 on their student loans within months
- HELP raise debt on July 1 this year
- The student loans are not subject to interest
- But they are increased by indexation
University graduates will each have an average of $1,500 added to their student loans this year, providing a $4.5 billion boost to the government’s coffers.
Interest is not charged on Higher Education Loan Program (HELP) debts, established in 1989 as HECS, but they are adjusted for inflation on June 1 each year, known as indexation.
This year, Australia’s three million graduates with outstanding loans will experience the largest indexation increase in decades, according to the National Union of Students.
The union is scheduled for a Senate hearing in NSW on Friday and says inflation, along with expensive real estate and rental markets, are putting graduates in an increasingly difficult position.
“Students and graduates need immediate financial support to combat cost-of-living crisis by pausing indexation of HELP debt payments,” union Senate entry, reports The Australian.
Australian university graduates will be hit by the biggest rise in student loan debt in decades, according to the National Union of Students
HELP debt is not subject to interest rates but is increased annually through indexation linked to the spot rate and inflation
“By increasing the student debt they take on, the government reduces their ability to take out home loans, further excluding them from the market.”
Under the HELP system, students can access up to $109,206 to pay for college courses, more for certain courses like medicine or aviation, but they must repay the money once they start earning at least $46,361 per year.
To finance this, the government borrows money at the Reserve’s Bank spot interest rate, which is 3.6 percent after a series of increases.
While the interest rate is not passed directly to students, the loans are indexed annually to maintain their true value based on a formula that takes into account the spot rate and inflation.
The ATO is expected to announce this year’s indexation rate in May.
Last year the indexation rate was 3.9 percent, but the National Tertiary Education Union expects it to rise to 6.15 percent this year.
According to the NUS, it will add $1,500 to the average amount of outstanding debt of about $25,000 per student.
Friday’s hearing will be held by the Senate’s Education and Employment Committee, which is examining a Greens bill.
The bill would remove indexation rates for HELP debt and raise the minimum amount graduates earn in some courses before repayments begin.
About three million Aussies have outstanding HELP debts in excess of $70 billion