Social Navigation

Repayment thresholds for Hecs help loans changed as inflation drove up debt


Australians with higher education Help loans will be able to earn a little more before they start paying back as inflation pushes student debt to new highs.

The federal government on Thursday submitted the official redemption thresholds for fiscal year 2023-2024, which confirmed that the minimum redemption threshold has been increased.

Graduates earning $51,550 must start paying off their student loans, an increase of $48,361. The other repayment categories have also been increased.

Student loans, which take the form of HECS-Help for Commonwealth-backed university places, do not charge interest.

Instead, the entire amount is indexed annually to inflation.

The latest consumer price index – Australia’s official inflation indicator – for the March quarter confirmed that aid loans would rise by a record high of 7.1 percent at the next indexation on June 1.

Aid loans are often labeled as a “good debt” because they are usually much cheaper than other types of debt since there is no interest on the repayments.

But that’s likely cold comfort to the millions of college graduates about to see their debts climb to their highest level in the three decades that the state loan system has been in place.

However, not everyone will repay more. That depends on how much one earns, and that’s where the federal government’s thresholds come into play.

Education commentator Andrew Norton said some people who were currently paying back their aid debts would not have to do so in fiscal year 2023-2024 and many others would drop a repayment bracket as thresholds increased by more than wages.

He wrote on Twitter that in the current inflationary environment, the Help indexation system would alleviate short-term financial pressures.

But he warned that it would increase long-term debt, not only because of the high indexation of current debt, but also by reducing principals, forcing those with greater debts to be indexed in the future.

The average indexation rate has been just under 2 percent over the past decade, but has skyrocketed in line with inflation, reaching 3.9 percent last year before this year’s unprecedented increase.

Crossbench and Greens MPs have urged the Albanian government to ease the debt burden of current and former students with Help loans, even if it would have an impact on the budget.

Independent MP Zoe Daniel has called for an independent review of the Help scheme, saying that if the government does not want to limit the debt incurred under the program it should consider linking the debt to the wage price index, or the cash interest rates from the Reserve Bank if these are lower than the CPI.

“The Help system urgently needs an overhaul. It is now not working as intended when it was introduced in 1990,” the Goldstein MP said earlier this month.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.