The Australian government has announced a major — and much-needed — change to how HECS-HELP debts are indexed, which is set to “wipe out” $3 billion worth of debt from around three million Australians.
As it gears up to unveil the 2024-2025 Federal Budget on May 14, the government has revealed a little spoiler of what HECS-HELP debt holders can expect. Shockingly it’s good news, not the indexation increase we were all high-key dreading.
Every year on June 1, HECS debts are indexed to ensure that the amount owed is in line with inflation. You may recall that in 2023, indexation hit 7.1 per cent, its highest hike since 1990. This increase left millions of Aussies rightfully freaking out over debts that were increasing faster than they could be paid off.
In fact, Yahoo! Australia reports that Aussies owe as much as $74 billion in HECS-HELP debt.
How does HECS-HELP debt work?
Previously, HECS-HELP debt indexation was calculated based on the Consumer Price Index (CPI) — an index which measures the cost of goods and services in Australia. With the ABC reporting that the CPI is at an all-time high, it makes it pretty bloody unfair that current and former students are copping that in the form of their HECS debt.
However, the 2024-2025 change means that HECS-HELP indexation will be calculated on either the CPI or the Wage Price Index (WPI), whichever is lower. Given that the cost of living is far exceeding the rate of wage growth these days, it’s a fairer way of calculating how much we should be paying back.
“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI,” Minister for Education Jason Clare said in a statement.
“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,” he continued.
The government’s announcement says: “This will benefit all Australians with a HELP debt, fixing the issue of last year’s spike in the CPI indexation rate of 7.1 per cent and preventing growth in debt from outpacing wages in the future.”
In even happier news, this change will be back-dated to all HECS-HELP debts that existed on June 1 last year, meaning those with debt will receive an indexation credit. Triple J’s Hack reports that last year’s 7.1 per cent rise will be lowered to 3.2 per cent.
The government announcement says that: “An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation.”
So what do these HECS-HELP changes mean for me?
Basically, the higher your debt is, the bigger the relief. Former and current students are looking at hundreds or even thousands being wiped from their current debt.
The government released a handy table with example figures.
The government also has a calculator HERE where you can figure out what kind of credit you’ll be looking at, dependent on your current HECS-HELP debt.
Finally, some good news when it comes to the wildly inflated cost of living we’re currently copping. Here’s hoping the May 14 Federal Budget contains more relief for struggling Aussies.
