May 31st 2024.
Tomorrow, millions of Australians who have taken out loans to fund their higher education will be facing a significant increase in their debt. This is due to the second-highest indexation increase, which will be applied to HECS-HELP debt and other higher education training loans on June 1st. However, there is some good news - once the necessary legislation is passed later this year, a credit will be applied to these loans to offset the increase.
The impact of this indexation increase will vary depending on the amount of debt an individual has. For those with the average Australian student debt of $26,494, they can expect to owe an extra $1245 or more on June 1st. However, for the approximately 1 per cent of student debtors who still owe $100,000 or more, their debt will increase by at least $4700. This is in addition to the 7.1 per cent indexation increase that was applied last year. In light of this, the federal budget has allocated $3 million to help reduce the burden of student debt.
Fortunately, there is some relief in sight as legislation will be changing the way loans are indexed in the future. This will prevent Australians from being hit with such substantial increases in the future. Those who are facing a high indexation increase tomorrow, as well as in 2023, will receive a credit once these changes come into effect later this year. For those with the national average debt of $26,494, this credit will amount to $1190. And for those with more than $100,000 in debt, they can expect to receive a credit of $4485.
The indexation percentage is linked to the cost of living, as measured by the consumer price index. This ensures that the increase in debt is in line with the overall increase in living expenses. Currently, just under three million Australians have student loans, with a combined total of $78.2 billion in HELP debt as of the 2022-23 financial year. These numbers highlight the significant impact that student debt has on many individuals in Australia.
A recent survey by Finder found that over 60 per cent of students are worried about being able to pay off their debt, and 12 per cent do not believe they will ever be able to do so. This highlights the need for changes to be made to the system to make it more manageable for students. Hopefully, with the upcoming legislation changes, we will see a more sustainable and fair approach to higher education loans in the future.
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