Australian students have received positive news last week about their Higher Education Loan Program debts.
A total of $3 billion would be cut nationwide for students that have a HELP loan.
Education Minister, Jason Clare, announced on Sunday that the government would cap the HELP indexation rate.
The purpose of the capped rate is to ensure that indexation matches the lower index which is either the Consumer Price Index (CPI) or Wage Price Index (WPI).
“This will wipe out what happened last year and make sure it never happens again,” Mr Clare said.
On June 1, each year, indexation is applied to the part of an accumulated study and training loan that has remained unpaid for 11 months. The consists of loans such as VET Student Loan (VSL), Student Start-up Loan (SSL) and HELP.
The indexation rate jumped from a low 0.6 per cent in 2021 to 3.9 per cent in 2022.
Source: ATO 2024
In 2023, student’s loans had a significant increase of 7.1 per cent. That is the largest hike since 1990.
The new policy that is currently pending to parliament would lower that indexation to 3.2 per cent.
University student, Jayd Rubain, is one of many students who are worried that the HELP debt cut would not be enough to relieve her of her overwhelming student loan.
“I currently have a $40,000 HELP debt which to some is not a lot but to me it is,” Ms Rubain said.
“I have dreams of owning a home one day but how can I when my first graduate job out of university won’t even pay my HELP debt off.”
For a student that has an average debt of $26,494 would receive an indexation credit of about $1,200 for the last two years.
This will only happen if the policy passes through legislation.
In 2021, the ATO had released new data on the HELP debt, covering the 2020-21 financial year.
Source: ATO 2021 (HELP Statistics 2020-21)
The Australian Government Actuary estimated that of the new debt incurred in 2020-21, 15.1 per cent is not expected to be repaid.
According to the latest figures in 2022, around 30,000 students owed about $220 million.
This is an alarming increase on what students are owing the government for their HELP loans.
The government’s 2024 budget will be delivered on May 14.
