In times of soaring inflation (7.4% at the time of writing) and the unprecedented current cost of living across Australia, the Government’s HELP (Higher Education Loan Program) debt has never been more unhelpful to many.
Per the Parliament of Australia (Dr Hazel Ferguson, 2021) the number of people that had outstanding HELP debts in 2012 was 1.68m, with this figure dramatically increasing too 2.9m in 2021.
Naturally, as more Australians utilise HELP loans to obtain the higher education required to lay necessary career foundations the total outstanding HELP debt has consequently increased. The gross HELP debt outstanding has risen by $43.2bn across the past decade shifting from $25.53bn in 2012 to $68.73bn in 2021.
Of this amount the Australian Government Actuary estimates that of the new debt incurred in 2020-21 a considerable 15.1% is expected to never be repaid.
In addition to the growing number of debt holders and the greater value of individual loans, strong inflation has resulted in sharp increases to the indexation rate incurred on loans for the 2022 year and beyond. In 2022 the indexation rate was 3.9% up from the previous 10-year average of 1.76%. Historically, many considered HELP debt to be ‘free’ money as the loans used to incur negligible interest increases over time. However, for the first time in the past decade the higher indexation has resulted in noticeable HELP debt rises which for many Australians are becoming harder to pay off whilst balancing the basic costs of living. Notably, Australia is ranked the 11th most expensive country in 2022 with respect to the cost of living and the purchasing power relating to average income (WorldData, 2022).
The average Australian weekly total earnings equal $1,376.60 ($71,583.2 annualised) across all employees in Australia as of November 2022. The variables previously outlined lead to an expected mean HELP debt repayment of 9.4 years.
As the interest incurred on HELP debts continue to rise beyond levels historically seen many are asking the question… is higher education worth it in our current economic climate?
Written for you by James Barton
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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