Labor’s election commitment to reduce student debts by 20% has been introduced to Parliament.
If passed, the discount will automatically be deducted from the amount before 1 June, when debts increased with the rate of inflation.
The Prime Minister has told TDA the debt discount would come into effect by the end of the year.
The Coalition initially opposed the measure but told TDA that it’s now reviewing it. Independent MP Dr Monique Ryan plans to amend the bill to change the timing of indexation.
HECS-HELP
When you take a university or TAFE course, you can either pay upfront or apply for a Higher Education Contribution Scheme loan (HECS) under the Higher Education Loan Program (HELP). Most students apply for this loan.
The system, rolled out in 1989, requires students to make payments on their loan depending on their income.
The re-payment threshold is currently $56,156, meaning if you earn above that amount annually, you will start paying off your debt.
20% discount
In November last year, the Government promised to reduce HECS-HELP debts by 20% if re-elected.
It also proposed to increase the re-payment threshold to $67,000.
Prime Minister Anthony Albanese repeatedly said it would be the first piece of legislation he would introduce in his second term of Parliament.
Education Minister Jason Clare introduced the legislation earlier today.
He said the HECS discount would be applied by the Australian Tax Office (ATO), and that anyone who currently had a debt “wouldn’t have to do a thing”.
However, Clare noted: “It will take a bit of time for the Tax Office to do this work.”
The Prime Minister told TDA that students should expect to see the discount by the end of the year.
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Opposition
The Coalition initially opposed the HECS debt changes during the election campaign.
In a statement, the then-Shadow Education Minister Sarah Henderson said the measure “reeks of unfairness and elitism”.
However, the Coalition has flagged it “won’t stand in the way” of the legislation, among other cost of living measures.
In remarks to TDA, Sussan Ley said she's actively considering the bill.
Indexation
HECS debts are indexed once a year on 1 June. This year, they increased by 3.2%, in line with CPI (inflation).
For example, a $50,000 debt on 31 May increased to $51,600 on 1 June.
The 20% discount will apply to the pre-indexation figure (i.e. the $50,000, not the higher amount).
Independent MP Dr Monique Ryan plans to table an amendment (change) to the legislation to adjust the timing of indexation.
Speaking to TDA, Dr Ryan said she wanted to change the timing "so that people aren't paying interest on money that they've already paid back".
Parliament
The Parliament is now set to debate the HECS debt discount legislation.
Labor has a majority in the House of Representatives, but not in the Senate. In order to pass the measure through the Senate, it will need support from either the Greens or the Coalition.
Universities Australia, a peak body representing 39 unis around the country, has welcomed the debt discount.
In a statement, CEO Luke Sheehy said he hopes the measures “give more people confidence to study at university”.
