Millions of Australian students with an outstanding HECS debt will see an increase in the amount of money they owe when the second-biggest indexation to their student debt is applied on Saturday.
Anyone who has an unpaid loan on June 1, will see their debt increase by 4.7 per cent.
According to the Federal Government, the average HECS debt is about $26,000. A 4.7 per cent hike on this would increase it by more than $1200.
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It’s a significant jump but still significantly less than the 7.1 per cent increase, the largest since 1990, experienced last year.
There is some relief for students, however, with almost $3 billion in student debt wiped in this year’s federal budget.
The budget revealed changes to the way that HELP loans are indexed, but those changes won’t come into effect until the relevant legislation is passed.
Each June, HECS debts are indexed to make sure the amount owed keeps up with inflation.
For almost 35 years, this indexation has been calculated based on the Consumer Price Index, which has reached record highs.
The process has been slammed as outdated and flawed, with more than 288,000 Australians signing a petition to demand an overhaul of the system.
The government answered the call, changing the way HECS was indexed.
The changes were spelled out in the Federal Budget 2024, in which Treasurer Jim Chalmers explained the government would move to cap indexation at the lower of the CPI or Wage Price Index (WPI), so HECS debts do not outpace wage growth.
“If legislation is passed, your HELP debt will then be adjusted to reflect the lower indexation rate of 4.0 per cent WPI in 2024,” the Department of Education said.
The ATO will apply credits to the HECS debt, lowering the owed amount, and backdate those credits to June 1, 2023.
That means that the 2023 CPI-based indexation — which, at 7.1 per cent, caused the average HECS debt of $26,494 to increase by $1881 — would be revised in accordance with the WPI figure of 3.2 per cent.
For the national average HELP loan, that equates to a total backdated credit worth $1,190 — a $965 credit for the 2023 indexation, and a $225 credit for the 2024 indexation.
Australians with a HECS debt can check the exact value of credits expected to be applied when legislation is passed, the Department of Education has created an Indexation Credit Estimator.
“Spikes in inflation have exposed a flaw in this system — and put young people under unfair pressure,” Chalmers said.
“We are fixing that and changing it so it won’t happen again.”
Students worried changes don’t go far enough
The move was one recommended in the Australian Universities Accord, a review of higher education that suggested making HECS “simpler and fairer”.
But some graduates have expressed concern that the proposed changes to HECS indexation don’t go far enough.
When university graduate Nariman Dein started studying, she felt privileged to access Australia’s student loan system.
Bright-eyed and eager to jump into university after finishing high school, Dein said the messaging around Australia’s university fee program, HECS-HELP, was it was “basically like free university”.
“I was told you don’t have to worry about it because you pay it off later,” she told 7NEWS.com.au.
“I thought if I had $40,000 in debt, it would stay $40,000 until I paid it off.”
But the University of Western Sydney graduate soon faced the harsh reality of indexation.
While the change to indexation has been lauded as a win for students, advocates say it should only be the beginning.
The National Union of Students welcomed the measure but said more must be done to build a truly fit-for-purpose HECS system.
“The reality is that even under this change, tertiary students will continue to get a raw deal,” NUS National President Ngaire Bogemann said earlier.
“WPI has only been lower than CPI on four occasions since 2000.”
Dein echoed this, saying the move was a “good start”.
“But it’s like the government saying they’ll help a little bit but they still want us to struggle. It’s not fair,” she said.
The accord warned student debt levels were turning people off universities — and Dein said she was not surprised.
Stress about HECS debts follows the graduate and her friends around, with many saying they “haven’t made a dent” in their repayments despite making contributions.
“It’s a real concern,” Dein said.
“I thought I was privileged to have HECS at first and not have to worry about paying for university up front, but now I’m like was it really a good idea to get myself into that debt.
“It’s a setback for no reason when we want people to be getting educated.”