University HELP debts could be reduced in 2021
Millions of Australians saddled with university debts could see the amount of money they have to pay back fall.
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Millions of Australians with university debts could see the amount of money they have to pay back fall.
In the June quarter the consumer price index fell by 1.9 per cent – the largest drop in its 72-year history – which is likely to bring students debt payments down.
Latest Australian Taxation Office statistics show 2.85 million people owe $66.3 billion in Higher Education Loan Program (HELP) debts.
The debts are indexed each year on June 1 and experts say it could result in debt amounts falling in 2021, dependent on the next three quarterly CPI results.
Commonwealth Parliamentary library researches Dr Hazel Ferguson and Gregory O’Brien said the drop to costs measured in the CPI index could be a win for students and those saddled with old study debts.
“The indexation arrangements for outstanding HELP debts, which are intended to maintain the real value of the debt, could result in reduced loan balances in June 2021,” they said.
“If CPI continues to fall or does not rise up enough for the June 2020 quarter decline, an indexation factor of less than 1 per cent could result which would see student loan debts shrink slightly.”
The amount indexed is calculated by taking the total debt at June 1 and then factoring in a full year’s CPI after the March quarter and comparing it to the previous year’s results.
ATO figures showed some of the largest HELP debts owing in Australia range from $250,000 to $680,000 and some debts are more than 30 years old.
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The minimum wage thresholds to start paying back debt increased in June, from $45,881 to $46,620 meaning Australians have to earn more before they are forced to start paying back at least one per cent of their debt.
HSBC chief economist Paul Bloxham said he expected inflation by 2021 to be running at 0.4 per cent in the March quarter year by year.
“The CPI forecasts suggest it won’t reduce the debt but the increase will be a whole lot smaller than it otherwise would have been,” he said.
Latest CPI figures show in the June quarter child care costs fell by more than 95 per cent
to due to the Federal Government’s policy to make it free for most of the June quarter.
Petrol prices fell by about 20 per cent and rent when down by 1.3 per cent.
The Federal Government recently proposed a new measure where a student who fails half of their first eight subjects in a degree would lose access to a government-subsided place and HELP loans.
The government wants to target students who amass debts by over-enrolling in subjects and sometimes at more than one institution.
Education Minister Dan Tehan said six per cent of students fail all of their first-year subjects.
Originally published as University HELP debts could be reduced in 2021