Key Points
- More than three million Australians have been hit with an increase to their student loan debt due to indexation.
- The education minister has told students the increase will drop due to forthcoming legislation.
- But there have been calls for the government to change indexation so it's not applied on amounts already repaid.
More than three million Australians have been slugged with a student loan hike, despite growing calls for a system overhaul.
HELP debt (such as HECS-HELP) goes up annually due to indexation — where inflation figures are used to increase the debt amount to reflect what cash is worth in today's dollars.
On Saturday, loans jumped 4.7 per cent, the second-highest increase in a decade, after last year's rise of 7.1 per cent.
Education Minister Jason Clare reassured those with a debt on Saturday morning that the government is set to make the system "fairer".
"Don't worry, [that figure is] based on an old unfair system that we're fixing," he said in a social media video.
"To fix it we have to pass legislation … that will happen later this year and when that happens, your HECS debt will drop."
How is the HECS-HELP system changing?
The government will introduce legislation so that student loans are indexed by the lower number of two figures: either the consumer price index (the inflation figure currently used) or the wage price index.
The legislation will be backdated to 1 June 2023, bringing down this year's rate to 4 per cent and last year's down to 3.2 per cent.
A person with an average student debt of $26,000 would see a reduction of about $1,200, while someone with a $45,000 debt would save around $2,000.
Due to this year's indexation rate, the loan amounts are still set to grow by $1,040 and $1,800 respectively (once the reduction is taken into consideration).
Australians have incurred a total student debt of over $100 billion, according to the Australian Taxation Office. Credit: SBS News
Calls for further change to indexation
Independent senators have called for mandatory contributions to HELP debt paid throughout the year to be deducted from the outstanding balance before indexation is applied.
Under the current system, payments withheld throughout the year are only deducted at the end of the financial year, after the debt is adjusted on 1 June.
"The government could, and should, have acted to change when indexation is applied so that people are not indexed on amounts already repaid," independent senator David Pocock told the Australian Associated Press.
Independent senator Tammy Tyrrell backed the calls, saying it was unfair for debts to go up without the contributions being paid taken into account.
In April, Greens deputy leader Mehreen Faruqi went urging the government to make "meaningful and substantial changes" to the system.
"Student debt is already locking people out of the housing market, crushing dreams of further study and stopping people from starting a family, and things are only getting worse," she said.
"Anything less than scrapping indexation ... is a betrayal to students."
With additional reporting from AAP
