Analysis commissioned by The Greens has shown student loans could increase by 4.8% this year, unless the Federal Government changes the way HECS debt is indexed.
Loans are increased once a year to reflect today’s rising prices (inflation) in a process called ‘indexation’. Last year, debts increased by 7.1%, the biggest rise since 1990.
The formula to calculate indexation is based on the last quarterly inflation rate (rising prices) released before the end of the financial year in June. That number, released yesterday, was 3.6%.
What is HECS?
When you begin a university 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. From 1974 to 1989, degrees were free.
The repayment threshold is currently $51,550, meaning if you earn above that amount on a yearly basis, you will start paying off your debt.
Indexation
Student loans increase every year through ‘indexation’, reflecting changes in the value of money over time.
The formula to calculate indexation is based on the March quarterly inflation data, which was released yesterday.
The Greens asked the Parliamentary Library to estimate this year’s indexation.
If the traditional formula is adopted, it’s suggested HECS indexation this year will be 4.8%.
Here’s what indexation could look like:
| Debt ($) | Increase ($) | Updated debt ($) |
| 50,000 | 2,400 | 52,400 |
| 75,000 | 3,600 | 78,600 |
| 100,000 | 4,800 | 104,800 |
Calls to change
Independent MP Dr Monique Ryan has led calls to change the way student loans are indexed. Ryan launched a petition demanding changes to indexation, which at the time of publication had more than 275,000 signatures.
Dr Ryan told TDA she’s concerned young people are “putting off starting their tertiary degrees because they’re frightened of accumulating debt”.
Greens Deputy Leader Mehreen Faruqi said: “Anything less than scrapping indexation in the May budget is a betrayal to students.”
Government remarks
Prime Minister Anthony Albanese has left the door open to changes to HECS indexation.
Last week, he said: “I think there’s a range of areas where we need to do much better with the younger generation basically, and HECS is one of them.”
Earlier this year, a Government-commissioned review of tertiary education recommended linking indexation to wages rather than inflation. Education Minister Jason Clare has said he is considering the review’s recommendations.
The Government has previously waived millions of dollars of debt for students due to historical errors.
