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Major HECS update to wipe $3 billion debt for struggling Aussies

Anthony Albanese has revealed the government's bill to change how HECS is indexed every year has finally been introduced to parliament.

Stewart Perrie
·Senior Journalist
·5-min read
Wads of Aussie cash next to Anthony Albanese
University students are a step closer to having $3 billion of HECS debt wiped as the government moves to reform how student debt is indexed. (Source: Getty)

Anthony Albanese has revealed the government's bill to wipe $3 billion off Australia's collective HECS debt has finally been introduced to parliament. The measure was announced prior to this year's Federal Budget and many have been patiently waiting for it to go to the next step.

It's expected to deduct around $1,200 from the average student loan debt, which has been calculated to be $26,500. Teal MP Monique Ryan, who has led the charge for an overhaul of the HECS system, told Yahoo Finance this could be the tip of the iceberg.

"This is just the beginning of a significant change to our HECS system," Ryan said.

"I think that it is time for a significant review of something which is no longer fit for purpose and doesn't, at this point, reflect the aspirations of the system when it was launched in 1989."

The Prime Minister explained on Thursday that the bill to change how HECS is indexed every year has been tabled in parliament, where it will have to be approved by the Senate and the House of Representatives.

The bill also includes the Commonwealth Prac Payment, which offers a $319.50 payment to students in certain fields during unpaid placements.

University students said they had been forced into "placement poverty" as they had to choose between paid work and sometimes hundreds of hours of mandatory placement hours for their courses.

Find out more about the cash boost here.

"Education changes lives. We want to make it more affordable for Australians," Albanese said on X.

Currently, HECS is indexed every year on June 1 to keep pace with inflation, and the government uses the Consumer Price Index (CPI) as the main indicator for how much the debt goes up.

This year, HECS debts across Australia were indexed by 4.7 per cent, which equated to more than $1,100 for the average loan. The year before was a humungous indexation jump of 7.1 per cent, and in 2022, it was a 3.9 per cent indexation rate.

That means Aussies with student debt have seen their loans indexed by more than 16 per cent in the last three years, which works out to be a collective $12.3 billion.

The government's HECS bill wants to change this indexation system so that the main indicator used is whatever is lower out of CPI or the Wage Price Index (WPI).

This will prevent peoples' debt growth outpacing wages in the future.

If the legislation is approved, last year's indexation spike would be revised to 3.2 per cent to bring it in line with WPI.

"An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation," the government said.

But the bigger your loan, the bigger the savings.

HELP DEBT at 30 June 2023

TOTAL ESTIMATED CREDIT FOR 2023 AND 2024*

$15,000

$670

$25,000

$1,120

$30,000

$1,345

$35,000

$1,570

$40,000

$1,795

$45,000

$2,020

$50,000

$2,245

$60,000

$2,690

$100,000

$4,485

$130,000

$5,835

The move was recommended by the Universities Accord review, which has also called for a review of how student debt impacts home loan borrowing capacity and the timing of indexation to ensure it occurs after annual payments.

That's hard to know as there could be a lot of back and forth between politicians about the bill.

There could be weeks or even months of deliberations before it gets legislated.

Or, there could be bilateral support and it could cruise through the Senate and the House.

But, the government has insisted that the legislation will be applied to this year's and last year's indexation increases.

It's expected to reduce the HECS debt of three million Aussies by as much as $3 billion.

Those with student debt won't receive the money in the form of cash, however, it will be applied as an indexation credit on your loan.

If you paid off your HECS debt between last year and this year, then you may receive a refund to your nominated bank account.

While the indexation aspect of HECS was a big stickler for Dr Ryan, she told Yahoo Finance there are a raft of reforms she would like to see enacted.

She would like to see the government address the following areas:

  • Get rid of the Job-ready Graduates Package: This was introduced by the Morrison government in 2021 to encourage people to choose university degrees that had real-world market demand like teaching and nursing. But it saw the cost of low-demand courses like arts degrees skyrocket.

  • Unpaid placements: Ryan said the government's announcement of $320 weekly payments to certain courses that require practical placements was a good step, but it needs to be more money and rolled out to more degrees.

  • Change the date for indexation: HECS is currently indexed on June 1. Ryan said this is an "inappropriate" time of the year because it means the student loan gets indexed for the previous year, regardless of what they've paid in the last 12 months. The MP told Yahoo Finance that the indexation date has to be moved to after the start of the financial year, not just before the end of the previous one.

  • Banks need to change how they assess HECS: If someone wants a bank loan, the lender will assess how much HECS debt they have and it can sometimes knock up to $100,000 from their borrowing power. Ryan said student loan debt needs to be viewed differently to make it fairer for people trying to buy a house or a car.

She said those unhappy with the government's plan should sit tight as there could be more changes coming soon.

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