Eligible Australians who’ve paid off their HECS debt since June 2023 could receive a cash refund from the Australian Tax Office.
It comes after the Government announced changes to indexation, set to wipe $3 billion in student debt.
Indexation is the annual increase in student debt to reflect inflation (rising prices). Subject to legislation being passed, the Government said it will backdate the changes to reduce last year’s historic 7.1% indexation figure.
So, how will it work, and what if you’ve paid off your HECS in the last year?
Background
The last indexation rate ATO announced student loans would increase by 7.1% in June 2023, the highest increase since 1990. This was because inflation was very high.
In a recent pre-budget announcement, the Government said it introduce a bill to overhaul indexation, to ensure it couldn’t be as high as it was last year.
If the bill passes, indexation will be based on the lower of either the consumer price index (the rate of inflation) or the wage price index (the figure measuring rising wages).
The Government’s plan to index HECS at the lower rate of these two figures will be backdated, meaning the 7.1% increase will be erased, and replaced with a 3.2% increase based on the WPI instead.
The difference between the original and new figures is 3.9%. The Government estimates that a $25,000 HECS debt would be reduced by over $1,000 due to its proposed changes.
Cash refund
The reforms mean the Government will essentially owe people a 3.9% refund on the HECS indexation they were charged in June 2023.
For Australians still paying off their HECS, this will be taken off their balance automatically.
However, those who’ve paid off their HECS since June 2023 will have the 3.9% difference credited to them.
For example, if you had a $10,000 HECS debt on May 31 2023, this would have increased to around $10,710 the following day.
However, if you’d been indexed at the corrected 3.2%, your debt would’ve risen to $10,320.
That means you were over-indexed by around $380.
If you still have a HECS balance, it will be reduced by $380. If you paid that debt in full since then, the Government will owe you $380.
The cash refund will only apply to those who paid their HECS debt in full after May 2023, when the 7.1% indexation rate was initially applied.
It won’t apply to those who paid their debts entirely ahead of the 7.1% increase kicking in.
Education Minister
A spokesperson for Education Minister Jason Clare told TDA that Australians who’ve paid off their HECS since June 2023 will receive a cash refund.
The refund will be automatically credited to whichever bank account users have linked to their MyGov.
However, anyone who owes the Government unpaid tax may have their refund directed back to the ATO to settle their outstanding payments.
Uni access
The indexation overhaul was part of several measures announced by the Government in recent weeks to broaden access to universities and other tertiary education providers.
Tuesday’s Federal Budget revealed a new target for 80% of Australia’s working population to hold a tertiary qualification by 2050.
Measures announced to achieve this goal include funding ‘bridging courses’ to help students who didn’t finish school prepare for university, and extra fee-free TAFE places.
