With the growing importance for the Government to battle with sky rocketing cost of living they have taken aim at HECS/HELP loan indexation. Before the proposed changes HECS/HELP loans were indexed to make sure the amount owed kept up with inflation, this was calculated using the Consumer Price Index (CPI). With the CPI reaching 7.1% for 2023, the largest increase since 1990, Australian’s are finding that their HECS/HELP loans are quickly growing faster than their wages, creating a debt spiral as their loans increase faster than they can be repaid. To combat these increases the annual HECS/HELP indexation will now be calculated using the lower of Consumer Price Index and Wage Price Index, which for the 2023 year is 3.2%, resulting in a reduction in indexation of 3.9%.

What Does This Mean For Australians?

A recent review called The Australian Universities Accord released by the Government shows that over three million Australians have HECS/HELP loans totaling more than $74 billion, with the average debt being $26,494, which in 2023 was indexed at 7.1% resulting in an increase of $1,881. With the proposed changes being backdated for the 2023 financial year Australians will save over $3 billion in indexation, reducing the average increase in 2023 from $1,881 to $1,033 that will be received as an indexation credit in HECS/HELP loan accounts.

How Much Can You Expect Back?

Further Reforms Recommended

The Australian Universities Accord has suggested further reforms relating to HECS/HELP loans in an attempt to lower the consequences of student debts as increasing cost of living pressures have grown. These include a review of bank lending practices so HECS/HELP loans don’t prevent people from being able to borrow money to purchase a house and changing the time of indexation so it occurs after the compulsory payments date.