Australian voters tend to reject US style education favouring more egalitarian systems where income does not determine access.

In the US, average student debt is USD $37,693 (public and private debt) taking an average of 20 years for individuals to repay. But, students often have a gap not fulfilled by loans.

For Australian domestic students, the cost of completing a bachelor degree is generally between $20,000 and $45,000, excluding some of the higher value courses. HECS-HELP loans are available for eligible students to cover the cost of tuition up to $121,844 for most degrees, and $174,998 for higher value degrees like medicine. The average higher education student debt in Australia is around $27,000 and on average takes just over 8 years to repay. Close to 3 million Australians have a student loan debt with debt totalling over $81 bn. Over 7 million have loans above $100,000.

Currently, student loans start to be paid back when an individual’s income reaches $54,435, with a repayment rate that scales according to income ranging from 0% to 10% when income reaches $159,664.

The Government has announced a series of changes to HECS-HELP including:

• Indexation rate calculation change to the lower of consumer price index (CPI) or wage price index (WPI) – currently CPI. Intended to be backdated to student loans on 1 June 2023, effectively removing the 7.1% spike that occurred in 2023.
• Increased minimum repayment threshold to $67,000 in 2025-26. The repayments will also be calculated on the income above the new $67,000 threshold rather than total annual income.
• 20% loan reduction for all study and training support loans before 1 June 2025 (around $16bn).

These changes apply to HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loans.

This will benefit all Australians with a student debt, fixing last year’s spike in the indexation of 7.1 per cent and preventing indexation from outpacing wages in the future.

This means the 7.1 per cent spike in indexation in 2023 will be reduced to 3.2 per cent (based on the lower WPI), and credits provided via the ATO.

The indexation rate for 2024 will also be reduced from 4.7 per cent to 4.0 per cent.

An individual with an average HELP debt of around $27,000 will see around $1,200 wiped from their outstanding HELP loans.

The ATO will automatically apply these changes to everyone with a student loan. This work will happen as soon as possible.

If someone has completely repaid their student debt after 2023 or 2024 indexation was applied, the credit would be via a refund to their bank account (assuming there are no outstanding government debts).

Australians with a HELP debt can find out how much this is estimated to benefit them using the HELP Indexation Credit Estimator here.

The Bill also supports the introduction of the Commonwealth Prac Payment from 1 July 2025 for around 68,000 higher education teaching, nursing, midwifery and social work students to help support them financially while they do the practical part of their degree.

It also expands FEE-FREE University Ready Courses which acts as a bridge between school and university to help more Australians get a crack at university and succeed when they get there.

Contact Indigo Financial on (08) 8212 8585 for all your accounting needs.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.