Repayment thresholds for Help loans changed as inflation drives up debts

Australians will be able to earn more before they start paying off their student loans, as inflation drives up debts to record highs.

Australians with higher education Help loans will be able to earn slightly more before they start making repayments as inflation drives up student debts to new highs.

The federal government lodged the official Help repayment thresholds for the 2023-2024 financial year on Thursday, which confirmed the minimum repayment threshold has been increased.

Graduates earning $51,550 will be required to start paying off their student loans, up from $48,361. The other repayment categories have also been bumped up.

Student loans, which for commonwealth-supported university places take the form of HECS-Help, are not charged interest.

Instead, the full amount is indexed to inflation each year.

The latest consumer price index – Australia’s official marker of inflation – for the March quarter confirmed Help loans would increase by a record high of 7.1 per cent when next indexed on June 1.

Help loans are often labelled a “good debt” because they’re typically much cheaper than other types of debt, given there isn’t any interest on the repayments.

But that’s likely to be cold comfort for the millions of graduates who are about to watch their debts inflate to their highest level in the three decades the government loan scheme has been in operation.

The Help loan repayment thresholds have changed. Picture: NCA NewsWire / Nicholas Eagar

However, not everyone’s repayments will increase. That depends on how much one earns, which is where the thresholds set by the federal government come into play.

Education commentator Andrew Norton said some people who were currently repaying their Help debts wouldn’t have to in the 2023-2024 financial year and many others would move down a repayment category because the thresholds were increasing by more than wages.

Writing on Twitter, he said the Help indexation system in the current inflationary environment would ease short-term financial pressure.

But he warned it would increase long-term liabilities, not only because of high indexation of current debt, but by reducing repayments, leaving people with greater debt balances to be indexed in the future.

The average indexation rate was just shy of 2 per cent over the past decade, but it has skyrocketed in line with inflation, rising to 3.9 per cent last year before this year’s unprecedented hike.

Crossbench and Greens MPs have been urging the Albanese government to ease the debt burden on current and former students with Help loans, even though it would affect the budget bottom line.

Independent MP Zoe Daniel has called for an independent review of the Help scheme and said if the government won’t cap debts incurred under the program, it should consider tying the debts to the wage price index, or the Reserve Bank’s cash rate if these are lower than the CPI.

“The Help system needs urgent review. It is not now operating in the way intended when it was introduced in 1990,” the Goldstein MP said earlier this month.

Originally published as Repayment thresholds for Help loans changed as inflation drives up debts