Cash-strapped millennials and millions of other Australians will have their student debt slashed by $3 billion under a cost of living measure announced on Sunday by Prime Minister Anthony Albanese.
After years of complaints there’s nothing in the budget for younger workers, singles and millennials, the Federal Government is finally taking action in a cost of living measure to address the mounting weight of student debt and rising rental costs.
Australians with a HELP debt can find out how much this is estimated to benefit them using the HELP Indexation Credit Estimator here.
By backdating this reform to last year, student loans affected by last year’s jump in indexation get this important cost-of-living relief.
The Government will backdate this relief to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on 1 June last year.
An individual with an average HELP debt of $26,500 will see around $1200 wiped from their outstanding HELP loans this year, pending the passage of legislation.
But students with huge debts of $100,000 who have studied expensive degrees including medicine, law or even studied multiple degrees could have $5000 wiped.
“This will wipe out around $3 billion in student debt from more than three million Australians,” Education Minister Jason Clare said.
“We are doing this, and going further. We will backdate this reform to last year. This will wipe out what happened last year and make sure it never happens again.”
The budget measure follows reports of the financial plight of graduate journalist, Caitlin Cassidy, who revealed she had run up a six-figure HECS debt after studying for a Bachelor of Arts but then staying on at university for years to get a Masters in Global Communication and a Graduate Diploma in Journalism – three degrees in total.
“Just did a back of the envelope on my student debt. I graduated with a debt of $99,700 and have paid back around $12k,” she wrote on X.
However, with indexation, her debt is now even bigger, sitting at $106,000. The Guardian education reporter said this included an increase of more than $7200 as a result of last year’s record indexation.
“I paid back $3,422, so my debt is $106k now, not $109.5k, but if indexation is 4% this year … It’ll go up again by $4,240, to $110k – even higher than last year. This is what we mean by ‘debt spiral’,” she said.
She has a Bachelor of Arts in Politics and Creative Writing, a Masters in Global Media Communication at Melbourne University, and a Graduate Diploma in Journalism at RMIT.
While HECS-HELP debt does not accrue interest, it is indexed for inflation every year.
This means, from June 1, anyone who hasn’t paid off their loan traditionally faces a debt rise in line with inflation, which last year was a whopping 7.1 per cent – the biggest increase in 30 years.
The Government has announced today it will cap the HELP indexation rate to be the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI) with effect from June 1, 2023.
While payments towards your HECS debt are taken out of your pay in real time, that money is not coming off your debt at the same rate.
Instead, the Australian Taxation Office (ATO) holds these funds as a credit until you file your tax return on or after July 1.
But, because indexation occurs before this on June 1, your past contributions are actually applying to the higher indexed rate, despite coming out of your pay much earlier.
This is why so many people are – despite making thousands in repayments – finding themselves in the same position or even worse off than they were the previous year.
Welcome relief
Ahead of last year’s 7.1 per cent indexation, 25-year-old Betty Zhang told news.com.au she was bracing for her debt to jump by an extra $8300.
Having studied a Bachelor in Exercise and Sport Science and then completing a Masters of Physiotherapy, Betty was looking down the barrel of a $127,000 HECS debt.
“I have a huge debt that I don’t think I’ll ever pay off in my lifetime,” she said. “My debt will only keep growing and whatever I’ve paid off won’t matter anymore.”
Minister for Skills and Training Brendan O’Connor said the measure continues the Albanese government’s work to ease cost of living pressures and reduce and remove financial barriers to education and training.
“VET Student Loans and Apprenticeship Support Loans support many Australians to get the skills they need for secure and rewarding careers, and these changes make sure that help is provided on a fairer basis.
“By backdating this reform to last year, we’re making sure that those with student loans affected by last year’s jump in indexation get this important cost-of-living relief.”
Prime Minister Anthony Albanese had hinted that an announcement regarding changes to Australia’s HECS system could be imminent.
“There’s a range of areas where we need to do much better with the younger generation basically, and HECS is one of them,” he said.
“What we’ve done is we’re developing a universities accord, essentially with all of the universities across the board, and what that has said is that the system can be made simpler and be made fairer.”