More than three million Aussies with a higher education loan will be paying more when the second-highest indexation increase on record is applied from June 1.
Unpaid HECS-HELP loans will jump by 4.7 per cent on Saturday, which is annually indexed to the consumer price index (CPI).
It’ll mean more pain for those repaying their students loans after already an expensive year in 2023 when the 7.1 per cent indexation hike came in.
However, the federal government is planning to reduce the financial headache by cutting about $3bn in student debts.
The measure will tie the indexation rate to whichever is lower of the CPI or wage price index (WPI).
WPI is expected to overtake the CPI by 2025.
Education minister Jason Clare said once the new legislation passes “later this year”, people will see their loans backdated to June 2023 in order to implement the new changes.
“If you’ve got an average HECS debt of $26,000, you’ll see it drop by about $1,200,” Mr Clare said.
“If you’ve got HECS debt of $45,000, it’ll drop by about $2000.
“We’re building a better and a fairer education system and the changes that were’ making to HECS indexation are a big part of that.”
Mr Clare said the “old, unfair system” will be fixed with the new legislation and prevent future indexation from blowing out again like it did in 2023 and 2024.
Last financial year, the average HELP debt of $26,500 jumped by $1881.50.
If the new rules had applied in 2023, student debts would have been indexed at 3.2 per cent – or $848- rather than 7.1 per cent.
Nearly three million Australians have student loans.
Australians owed a combined $78.2 billion in HELP debt during the 2022-23 financial year.