The Federal government has announced major changes to HECS indexation as part of the budget on May 14th. Debt will now be indexed to wage growth as opposed to the Consumer Price Index (CPI) applied retroactively to last year.
In the context of a cost of living crisis, the government is balancing delivering a second budget surplus with more relief, without putting more upwards pressure on inflation.
The changes were a recommendation in the University Accord Report, and will save the average borrower $1200 on their debt this year. A student with $15,000 of debt will save $670, while someone with $50,000 of debt will save $2,245.
Last year, indexation reached a record 7.1% meaning some students had their debt go up even after substantial repayments. The rate has been retrospectively lowered to 3.2% and students will have the difference credited to their account.
“This will wipe out around $3 billion in student debt from more than three million Australians,” said Education Minister Jason Clare in a statement.
“We are doing this and going further. We will backdate this reform to last year. This will wipe out what happened last year and make sure it never happens again,” Clare said.
The Greens have been pressuring Labor for months to scrap indexation in the budget to provide more immediate relief to younger people. Teal Independent MP Monique Ryan and other members of the crossbench have also been pressuring the government to do more for younger voters.
Ryan’s petition, started months ago, calling on the government to modernise HECS has gained over 270,000 signatures. She has been calling on the government to do more to help younger generations whose HECS debt has prevented them from breaking them into the job and housing market.
“Yet over the past year they have paid off only $1200. In other words, hundreds of thousands of Australians with a HECS debt are either treading water or seeing their HECS debts increase despite working hard to pay them off,” she said.
Deputy Leader of the Greens and spokesperson for Education, Senator Mehreen Faruqi argued the changes did not go far enough.
“Student debts shouldn’t be growing at all, it’s highway robbery from a Prime Minister who went to uni for free.
“Labor needs to scrap indexation altogether and raise the minimum repayment threshold to median wage so people lose less out of their pay every week. Then they need to wipe student debt and make Uni free again,” she said.
This is the first stage of reforms the government is planning to implement in response to the Accord Report.
