The Australian Government has unveiled a significant initiative aimed at reducing student debt burdens for over three million Australians with HELP/HECS debt. This move is part of the upcoming Federal Budget and is set to wipe out approximately $3 billion in student debt.
Key Points of the Plan:
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Capping Indexation Rates: The indexation rate will now be capped at the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI). This change means that student debt will grow at a slower pace compared to previous years.
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Backdating the Change: Effective from June 1, 2023, this reform will backdate adjustments. For instance, last year's 7.1 per cent indexation will be recalculated to align with the WPI, which stood at 3.2 per cent.
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Savings for Students: On average, individuals are expected to save around $1,200 due to these revisions.
Estimated indexation credit for HELP debtors
The Australian Taxation Office (ATO) will automatically apply the revised HELP debt indexation rates to loans once the relevant legislation is passed.
Below is an estimate of the indexation credit for HELP debtors based on different debt amounts:
| HELP Debt (as of June 30, 2023) | Total Estimated Credit for 2023-2024* |
|---|---|
| $15,000 | $670 |
| $25,000 | $1,120 |
| $30,000 | $1,345 |
| $35,000 | $1,570 |
| $40,000 | $1,795 |
| $45,000 | $2,020 |
| $50,000 | $2,245 |
| $60,000 | $2,690 |
| $100,000 | $4,485 |
| $130,000 | $5,835 |
If I paid off my HECS last year, what happens?
Federal Education Minister Jason Clare clarified that individuals who fully paid their HELP loan before the indexation changes took effect may be eligible to receive their indexation credit as a cash refund, provided they have no other tax liability. In simpler terms, if you don't owe any money to the tax office this year, you could get a tax refund.
HECS debt relief for other student loans
This HECS debt relief initiative also extends to apprentices who have loans through the VET Student Loan program or Australian Apprenticeship Support Loan. These loans are similar to HECS but for those pursuing courses at TAFE or independent higher education providers, will also benefit from these changes.
This move is anticipated to provide substantial financial relief to a wide spectrum of students and apprentices across Australia.
