How much you will save under HECS changes
University grads will be better off after the Albanese government announced HECS-HELP reform that will wipe $3 billion from student debt.
The date that all tertiary education graduates dread - June 1 - is fast approaching.
That's when HECS-HELP debt is adjusted (typically upwards) in line with inflation.
But this year could bring financial relief to debt-saddled graduates.
Around 3 million grads to save on student debt
By way of background, HECS-HELP debt, used to pay for tertiary education, is interest-free.
The catch is that the outstanding balance is adjusted annually in line with inflation.
That hasn't been a problem in the past.
But in recent years the cost of living has skyrocketed.
In 2023, graduates faced a 7.1% cost-of-living increase in student debt, adding thousands of dollars to outstanding balances.
The good news is that as part of the 2024 Federal Budget, the Albanese Government has announced a cap on the HECS-HELP indexation rate.
Under the proposal, student debt will increase by the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI) effective from June 1, 2023.
According to Jason Clare, Minister for Education, "This will wipe out around $3 billion in student debt from more than three million Australians."
As the proposed changes will be backdated to 1 June 2023, an indexation credit could be available to reduce graduates' outstanding debt.
That's because the indexation rate applied on 1 June 2023 was 7.1%. Under Labor's proposal this is set to be reduced to 3.2%.
It means students who forked out 7.1% in debt charges may have a credit available to reduce an existing HECS-HELP loan.
In addition, the indexation rate to be applied from June 1, 2024, would be cut from 4.7% to 4.1%.
How much you will save
The proposed change will see a grad with the average HECS-HELP debt of $26,500 have around $1200 wiped from their outstanding balance.
However, as the table below shows, if your HECS-HELP debt is at the top end of the scale, say, $130,000, which can be the case for graduates of law or medicine, the new changes could result in a credit of up to $5835.
The changes do need to go through parliament, but to know how much you could save, head to the education.gov.au website for the HELP Indexation Credit Estimator.
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