HECS/HELP indexation is sending those earning less than $65,000 backwards

by Greg Jericho



Ending the indexation of HECS/HELP debts would deliver a truly interest free-loan for students

On 1 June this year, more than 3 million holders of HECS/HELP debt will be hit with an indexation increase of between 4.2% to 4.8%. Combined with a 7.1% increase last year, many people who earn less than $65,000 will find their HECS/HELP debt is bigger than it was two years ago, even after repayments.

Technically HECS/HELP debts are “interest free”, but in reality, they increase each year in line with CPI. When inflation rises quickly, and faster than wages, these CPI increases significantly add to a person’s debt. A true interest-free loan would have no indexation at all. This is made more acute by the fact that indexation is currently hitting Australians so hard many find themselves going backwards.

In 2022-23 the average HECS/HELP debt for a person in their 20s was $30,763. The 7.1% indexation added another $2,184 to that debt – if you earned less than $63,000 in that year (barely below the average total earnings in 2022 of $71,687) then your compulsory HECS/HELP repayments didn’t cover this amount.

Even if we assume a 4.2% wage rise in line with the current wage price index, with the increased debt and an estimated indexation of 4.5%, this will leave those with an average HECS/HELP, and who are currently earning less than $65,000, with more debt than they had two years ago.

At a time when the government is committing $50bn towards defence with barely a ripple of concern of the cost to the budget, it is clear that the government could choose to relieve the debt burden of Australians.

The most recent budget figures show that the indexation of HECS/HELP debt has soared over the past two years due to inflation. Compounding this are the increasing costs of university fees which are adding to the debt of students even while they continue their studies. The Australian government could cancel indexation for just $1.3bn-$1.5bn a year over the forward estimates – a paltry figure in comparison to $50bn on defence.

Such a move would reduce the debt burden on many Australians allowing them to pay off their HECS/HELP faster, and also demonstrate a commitment towards education that is essential at a time when Australia remains in the midst of a skills crisis.

HECS/HELP was never meant to trap Australians in debt for their working life, and ending the indexation would be a strong move to help young Australians.

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