The government has promised a huge change is coming to Australians’ student debt balances, with legislation to adjust how indexation is calculated.
On Sunday, it was revealed legislation will be introduced into parliament to student loan increases to add in a new method of calculating indexation.
Backdated to June 1 last year, increased would now be the lower of the two between the Consumer Price Index (CPI) and the Wage Price Index (WPI).
This measure will capture all student debs that were indexed in 2023.
Last financial year, the average HELP debt of $26,500 jumped by $1881.50, or 7.1 per cent, based on the CPI measure which records inflation by noting the changes in a basket of consumer goods and services.
Over the same period, the WPI rose only 3.2 per cent — which would have seen the average HELP debt increase by $848.
According to the government’s calculation, the average student loan holder will see about $1,200 wiped from the outstanding balances at the end of the financial year.
Someone with $100,000 owing on their student loans would have almost $4,500 cut from their balance.
The change will apply to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on 1 June last year.
The move, which will be included in the May budget, is hoped to provide “significant relief” to those with student loans amid the fight against inflation.
“This will wipe out around $3 billion in student debt from more than three million Australians,” Minister for Education Jason Clare said.
“This will wipe out what happened last year and make sure it never happens again.”
Skills and Training Minister Brendan O’Connor said by backdating this reform to last year, the government was ensuring last years’ indexation jump would receive cost-of-living relief.
“This continues our work to ease cost of living pressures and reduce and remove financial barriers to education and training,” he said.
“These changes make sure that help is provided on a fairer basis.”