7 May 2024

Relief for millions with indexation rate changes set to slash student debt

| Andrew McLaughlin
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Jason Clare

Education Minister Jason Clare said the indexation changes would be backdated to 1 June, 2023, and benefit more than three million people with student debt. Photo: Jason Clare Facebook.

The Federal Government has made a surprise pre-budget announcement that will cut student debt by more than $3 billion.

The changes are backdated to 1 June 2023, and will align the HELP indexation rate with the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI), instead of the CPI as it currently stands.

The relief will apply to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on 1 June, and will reverse last year’s spike in the CPI indexation rate.

If these loans had been pegged to the WPI last year, the indexation rate would have been just 3.2 per cent instead of the 7.1 per cent rate of the CPI.

The change will wipe $1200 off the average HELP loan of about $26,500 as of 1 June last year. A government HELP indexation credit estimator is available, but examples of credits to be given include $670 for a HELP debt of $15,000, $1570 for a debt of $35,000, $2020 for a debt of $45,000, $2690 for a debt of $60,000, $4485 for a debt of $100,000, and $5835 for a HELP debt of $130,000.

The policy has been changed in response to recommendations in the Australian Universities Accord, a 12-month review of Australia’s higher education system led by a panel of eminent Australians and chaired by Professor Mary O’Kane, which was released in February.

READ ALSO Australian Universities Accord Report promises much, but can the government deliver?

Minister for Education Jason Clare said the changes would benefit more than three million Australians.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI,” he said. “We are doing this, and going further.

“We will backdate this reform to last year – this will wipe out what happened last year and make sure it never happens again.

“This is a really big and important reform that will make HECS fairer. And it’s one part of the first stage of our response to the Universities Accord report that we will set out on budget night.

“We’re looking at the whole report. This is a report not just for the next budget but for the next decade and beyond. This is one of the recommendations that we’ve identified that we need to act on now – and not just now, but we need to take action to fix what happened last year.”

Minister for Skills and Training Brendan O’Connor said the changes should ease cost-of-living pressures and reduce and remove financial barriers to education and training.

“VET Student Loans and Apprenticeship Support Loans support many Australians to get the skills they need for secure and rewarding careers, and these changes make sure that help is provided on a fairer basis,” he said.

“By backdating this reform to last year, we’re making sure that those with student loans affected by last year’s jump in indexation get this important cost-of-living relief.”

READ ALSO UC education students given even more placement opportunities through $12.8 million government agreement

ACT independent Senator David Pocock welcomed the changes, but said it was just a fraction of the reform higher education needed.

“Making this change to indexation now and backdating it will give some reprieve to millions of students on their loans but only fixes a small part of the problem,” Senator Pocock said.

“Today’s announcement delivers on one of five parts in just one of the 47 recommendations put forward in the Universities Accord. We need the government to be bold and deliver the big reforms experts have told them are needed after a year-long review process.”

Senator Pocock said increases in Austudy and other working-age payments were required to bring them up to a liveable rate, and the timing of the HELP indexation should be changed so it isn’t applied to payments already made.

The Independent Tertiary Education Council Australia (ITECA) also welcomed the indexation change, but also said more could be done to support students studying with independent Registered Training Organisations (RTOs) and higher education institutions that had a FEE-HELP loan.

ITECA chief executive Troy Williams said: “It’s abhorrent that the Australian Government whacks a 20 per cent student loan tax on the debts of people investing in study to achieve their life and career goals. It’s time for the Australian Government to end the student loan tax.”

Universities Australia CEO Luke Sheehy said the changes were a significant win for Australians with a HELP debt and would make a difference in people’s lives.

“Calls to put students first have been loud and clear, and the Albanese Government has listened and taken decisive action,” he said.

“We look forward to the government’s further response to the Australian Universities Accord final report in the coming weeks.”

Original Article published by Andrew McLaughlin on PS News.

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This is a good start, but a start is all it is. The indexation date also needs to be moved from 1 June to 1 July to prevent interest being charged on debt already paid off. The ridiculous fee changes made by the former government also need to be reversed.

When’s the cutoff – those in uni now, those who left five years ago?

There’s no cutoff. It applies to everyone with a debt, regardless of whether they’ve finished studying or not

more ALP window-dressing instead of fundamental reform

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