Millions of dollars to be wiped from Aussie HECS/HELP debts

Thousands of Aussies are set to get a combined $5.4 million wiped from their student debts following a records error.

Thousands of students are set to get their HECS debts partially wiped after a records error, with both current and former higher education students caught up in the mistake.

The Department of Education has identified a number of students who did not have their loan records correctly transferred to their Australian Taxation Office (ATO) student loan accounts due to “missing information”.

This week, The Daily Aus reported that a combined $5.4 million in fees added through indexation would be wiped from the debts of more than 13,000 people across 104 educational institutions.

The missing information that sparked the records error primarily relates to missing student Tax File Numbers and errors linked to the application of the upfront loan discount.

“Higher education providers are required to submit complete and accurate student information to the Department of Education to support a range of programs, and in some instances this did not occur. Providers are reliant on student information in this regard,” a Department of Education spokesperson told news.com.au.

Millions of dollars are set to be wiped from HECS debts. Picture: iStock

In order to ensure affected past and present students are not “unfairly financially disadvantaged”, the Australian government will waive annual indexation on the delayed loans of those affected for previous years and 2023.

News.com.au understands the record keeping error meant that some students may not have been aware of these loans.

From June 1 each year, all outstanding HECS-HELP loans are adjusted in line with the inflation rate. This year, the debts rose by a whopping 7.1 per cent - the biggest increase seen in 30 years.

Future indexation rates related to the delayed loan records will apply as usual from June 1, 2024.

The department has been working with higher education providers since early 2023 to correct the records.

Impacted individuals have been progressively contacted from May 2023 to ensure they are aware of the issue and understand the support options available to them.

For those impacted, updated loan records became visible on their ATO accounts from August 2023.

3m Aussies ‘swept away by a debt avalanche’

According to the Australian Taxation Office, 15 per cent of Australians are saddled with student debt, meaning more than three million people were impacted by this year’s massive 7.1 per cent indexation.

A recent Finder survey of more than 300 Australians with current student debt found over half were concerned about their ability to repay it.

Worryingly, 14 per cent of respondents said they didn’t think they would ever be able to repay their student debt.

Graham Cooke, head of consumer research at Finder, warned that increasing student debt could impact the ability of young Aussies to break into the property market.

“Inflation is causing headaches for almost all Australians, and former students are no exception,” he said.

“Our high inflation rate means more interest will be charged against student debt than we have seen in decades. No doubt the effects will be significant.

“Many Australians with plans to get on the property ladder or take out any sort of loan in the future will find it extremely difficult as lingering student debt is a massive liability.”

Earlier this year, there were called for the government to help ease the cost of living for young people by pausing indexation.

Eight crossbench MPs and senators called for urgent intervention to stop millions of Aussies being “swept away by a debt avalanche” on June 1.

In their letter to Prime Minister Anthony Albanese and Education Minister Jason Clare, they warned indexation was causing student debts to increase faster than they were being paid off.

“Larger debts take much longer to pay off, with student debt becoming a lifelong burden for too many,” they wrote.

“The growth of student debt disproportionately impacts young people and women, entrenching inequality.”