Millions of Aussie students to be hit with debt increase tomorrow – but new law offers a silver lining
Three million students with HECS-HELP debt will receive an increase in their debt on Saturday.
Students will see an indexation increase of 4.7 percent applied to their HECS debts and other higher education loans.
However, those affected by the increase will receive a credit on their loans after the legislation is passed later this year.
For a graduate with an average student loan debt of $26,494, their debt increases by another $1,245 and they receive a credit of $1,194.
No interest is charged on student loans.
Instead, the indexation rate is added to account for changes in the price of goods and services, which in Australia are measured by the Consumer Price Index.
The average indexation percentage over the past ten years was just below 2 percent.
However, this has skyrocketed in line with rising inflation. In 2023, interest rates reached a ten-year high: 7.1 percent.
Nearly three million university students (pictured) will see their student loan repayments, HECS, increase by 4.7 percent
In the May federal budget, the government announced it will cut $3 billion from the HECS debt indexation for struggling students.
Education Secretary Jason Clare said: “We will do this and move on. We will roll back this reform to last year. This will put an end to what happened last year and ensure it never happens again.”
On average, the amount students owe to the ATO for their HECS and HELP debt will be reduced by $1,200.
The change will apply to all HELP, VET student loans, Australian Learner Support Loans and other student loan accounts in existence on June 1 last year.
The government will also change the way in which the indexation of student loans is calculated.
This measure will expire on June 1 last year, which will also reduce all student debts that are indexed in 2023.
Under Labour’s plan, indexation of HELP or HECS debt will be based on whichever was lower from the Wage Price Index (WPI) or Consumer Price Index.
If the legislation is passed, HELP debt will be adjusted to reflect the lower indexation rate of 4.0% WPI in 2024.
Australians had a total of $78.2 billion in HECS-HELP debt as of the 2022-2023 financial year.