Student debts up amid surging inflation: what you can do

Students’ HELP debts have jumped by the largest amount since 2009. As inflation rises further, here’s what to think about.

Student debts for almost three million Australians are increasing at their fastest rate in 13 years today, propelled by surging inflation.

The June 1 indexation of student HELP debts increases outstanding loan balances by 3.9 per cent – more than six times higher than last year’s 0.6 per cent – prompting warnings for people to check their balance and consider repaying it faster.

Comparison website Mozo.com.au says the average HELP debt of $23,380 is climbing by $908 because of the student loan index increase, and spokesman Tom Godfrey says it’s “yet another cost of living pain point for younger Australians”.

He says people can check the balance of their HELP debt by logging into my.gov.au, and can consider speaking with their employer about increasing the money diverted from their salary towards repayments.

“If inflation continues on an upward trend, another index increase could be set for next year, so the more you can pay down over the next 12 months the better off you’ll be,” Godfrey says.

Mozo.com.au’s Tom Godfrey says student loan indexation could climb sharply again.

The Australian Taxation Office says it’s not just HELP loans that are impacted by the indexation – it also affects VET student loans, student start-up loans, trade support loans and others.

“Indexation maintains the real value of the loan by adjusting it in line with changes in the cost of living as measured by the consumer price index (CPI),” it says.

“The indexation figure is calculated each year after the March CPI is released. It is based on financial figures collected by the Australian Bureau of Statistics over the previous two years.”

Minimum loan repayments rise as people’s incomes increase. The ATO says nothing is payable when income is below $47,014 in 2021-22, but then it rises incrementally.

Someone earning between $54,283 and $57,538 pays 2 per cent of their income, for $60,992 to $64,651 it’s 3 per cent, the minimum repayment is 6 per cent if income is between $86,519 and $91,709, and it’s 10 per cent for those earning above $137,898.

Young adults are being hammered by surging prices of food, fuel and other items, reflected by the latest CPI figure of 5.1 per cent.

“The student loan index is calculated using the past two years of inflation rates, not just the most recent CPI,” Godfrey says.

A similar annual inflation figure next March would see the index rise about 5 per cent next year, after sitting below 2 per cent for the past six years.

“The good news is unlike credit card debt, personal loan or buy now pay later debt, you don’t have to keep paying down your HELP loan if you find yourself out of work,” Godfrey says.