HECS/HELP debt for low income earners is set to increase due to indexation

by Eliza Littleton


The indexation of HECS/HELP debt this year will leave people earning less than $62,000 with a bigger debt even after their repayments.

On the 1st of June, this year, over 3 million Australian students will be slugged with a massive increase in their HECS/HELP debt, which means they will take longer to pay off.

While HECS/HELP debts are technically interest-free loans they are still linked to the value of inflation through indexation and because of the spike in the prices of goods and services, the $74 billion of HECS/HELP debts owed will rise by a whopping 7.1%. Worth around $1,760 of additional money to repay on the average debt.

Prices in the economy may have been rising fast and consequently so will educational debts but wages – what we use to repay debts – have been growing much slower. This year, some people will see their debt increase by more than they repay.

For someone with a debt of $24,770 (the average) earning $50,000 a year their debt will increase by $1,259 after a repayment of $500. In fact, using the average debt, anyone earning between $48,361 and $62,738 will go backwards this year due to indexation. For those owing more than the average debt that upper income threshold for going backwards is higher.

Indexation has increased aggregate educational debts by an average of $660 million between 2006 and 2021 but due to inflation it reached $2.5 billion in 2021-22 and the budget estimates this year indexation of HECS/HELP will generate $3.6 billion.

Of course, the lucky few who can afford to pay their tuition fees upfront will never incur the cost of indexation, but the impact on inequality doesn’t stop there. People between the ages of 20 and 29 hold 53% of the outstanding debt owed and women owe 58% of outstanding debt owed. Both groups on average earn lower wages and indexation will likely elongate their repayment periods.

Worse still, the government did nothing in the recent federal budget – ignoring calls to abolish HECS/HELP indexation and give Aussies a break.

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