Federal Budget measure to reduce HECS and HELP debts for students

More than three million uni students, apprentices and trainees will share in $3bn of student debt to be wiped out in this month’s federal budget. See how much you’ll save.

The average university debt will shrink by $1200 under budget changes to the indexation of student loans.

More than three million uni students, apprentices and trainees will share in $3bn of student debt to be wiped out in this month’s federal budget.

The move comes as the Albanese government is under increasing pressure to ease the cost of living crisis for families and young people trying to break into an inflated property market.

The windfall reductions in the amount people owe the Australian Taxation Office (ATO) for their education will see the average Higher Education Contribution Scheme (HECS) and Higher Education Loan Program (HELP) debt cut by $1200.

Under the changes to be outlined today (Sunday) by Education Minister Jason Clare, the government will alter the way it calculates the indexations to university debts as well as Vocational Education and Training (VET) and apprenticeship support loans.

Prime Minister Anthony Albanese and Education Minister Jason Clare want to slow the rate of increase on students’ HECS and HELP debts. Picture: Lukas Coch

At present the loans are tied to the consumer price index (CPI), which last year leapt a massive 7.1 per cent in the high inflation environment.

Indexation will instead now be tied to whichever is lower out of the CPI or the wage price index (WPI), which records wage growth.

To sweeten the deal the government has agreed to backdate the change — recommended by the Australian Universities Accord — to June 1, 2023, which will mean students’ payments last year will now only have risen 3.2 per cent.

The adjustment will be rolled over as a credit, which together with the cut in this year’s indexation rate from 4.75 per cent to 4 per cent, will see $1200 wiped from the average sized HELP debt of $26,500.

Students with larger debts will benefit even more, with a student who has a debt of $50,000 having their debt cut by $2245.

Mr Clare said the move would wipe out around $3bn in student debt from more than 3 million Australians.

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

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

Minister for Skills and Training Brendan O’Connor said the change built on the government’s work to ease cost of living pressures for more apprentices, trainees and students, and reduce and remove financial barriers to education and training.

According to the ATO, HELP or HECS debts total $78bn.

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Originally published as Federal Budget measure to reduce HECS and HELP debts for students