The financial year doesn't end for another two months, but there's a closer deadline many people with university debts are dreading: June 1.
On June 1, all unpaid HECS/HELP debts will automatically increase when indexation is applied.
If you've got a higher education debt, here's what you need to know.
But if you're not familiar with HECS, tap the links below for a quick explanation:
- What is a HECS debt?
- What is indexation?
What is the HECS indexation rate for 2024?
The Australian Taxation Office (ATO) hasn't formally confirmed the indexation figures yet.
But, now we have the latest Consumer Price Index (CPI) numbers, we can work it out ourselves.
This year, HECS-HELP debt is expected toincrease by 4.7 per cent after indexation.
But that's provided the same formula from last year applies (more on that later).
It's less than last year's 7.1 per cent increase, but significantly higher than 2021— when indexation was just 0.6 per cent.
How much is my HECS debt going to go up by?
Below is a calculator that will tell you how much your HECS-HELP debt will increase by if indexation is applied in the same way it did last year.
It's automatically set to $25,000 to represent a typical HECS-HELP debt.
Plug in your debt balance to see what it might look like post-indexation.
But, remember, this is an estimate based on last year's indexation formula.
When is HECS/HELP indexed?
June 1.
But with the federal budget coming up on May 14, federal Education Minister Jason Clare has indicated he's open to changing the way HECS repayments are calculated.
It's unclear what that could mean— or whether any changes would come into effect before this year's indexation deadline — so we'll be combing through the budget papers in a few weeks time for more details.
Where can I find my HECS debt?
You can check it online at the ATO website or through the myGov app.
But you'll need to create a myGov account and link it to the ATO.
If you're looking for your total in the myGov app, tap the Services icon and tap on the Australian Taxation Office link in the menu.
Once you're in the ATO menu, scroll down to the Loan accounts section and tap the view button.
The balance is what you still owe.
Which education loans are indexed to inflation?
Any higher-education loan scheme is indexed, including:
- Higher Education Loan Program (HELP)
- VET Student Loan (VSL)
- Student Financial Supplement Scheme (SFSS)
- Student Start-up Loan (SSL)
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
- Trade Support Loan (TSL)
What were the previous HECS/HELP indexation rates?
The lowest indexation rate we've seen in the past 14 years was in 2021, when it was just 0.6 per cent.
The highest was last year's, at 7.1 per cent.
Here's a look back:
Who has the highest HECS debt in Australia?
Last year, the Australian Tax Office (ATO) released the country's 100 largest HELP/HECS debts through a Freedom of Information request.
The highest debt was $737,000.
The second highest was $495,990, with the top 10 all holding balances of more than $300,000.
By the end of the 2023 financial year, more than 86,000 people owed a debt between $60,000 and $70,000.
All up, nearly three million Australians with a student debt owe the government a total of $78 billion.
What is the average HECS debt in Australia?
The average student HECS debt in Australia is $26,494.
The table below shows how much the average HECS debt has gone up since the 2009-2010 financial year.
Once the 4.7 per cent indexation is applied, the average student debt of $26,494 will increase by $1,245.
What is the maximum HECS/HELP debt limit?
According to the Australian Government Study Assist website, the HECS/HELP loan limit is $121,844 for most students.
The limit for students studying medicine, dentistry, and veterinary science courses leading to initial registration is $174,998.
But you'll notice how thehighest debt we talked about earlier was $737,000— which is much more than the limit.
That's because, if they've gone unpaid, HECS debts can increase with time.
And that's how people can end up paying more for their loan than they initially borrowed.
How much do you have to earn to pay back HECS debt?
Here's what the 2023-24 financial year's repayment rates are, according to income.
But keep in mind, these repayment rates may change come July.
- Below $51,550: Nil
- $51,550 — $59,518: 1.0%
- $59,519 — $63,089: 2.0%
- $63,090 — $66,875: 2.5%
- $66,876 — $70,888: 3.0%
- $70,889 — $75,140: 3.5%
- $75,141 — $79,649: 4.0%
- $79,650 — $84,429: 4.5%
- $84,430 — $89,494: 5.0%
- $89,495 — $94,865: 5.5%
- $94,866 — $100,557: 6.0%
- $100,558 — $106,590: 6.5%
- $106,591 — $112,985: 7.0%
- $112,986 — $119,764: 7.5%
- $119,765 — $126,950: 8.0%
- $126,951 — $134,568: 8.5%
- $134,569 — $142,642: 9.0%
- $142,643 — $151,200: 9.5%
- $151,201 and above: 10%
What is a HECS debt?
It's a debt people accumulate if, instead of paying their university fees up front, they opt for a federal government loan to pay it off later.
These debts are interest-free.
But that doesn't mean they won't increase because, each year, indexation is applied.
And indexation doesn't just apply to the original figure students borrowed— it applies to whatever the debt is at the time.
So, say a degree cost $20,000.
And, after a year, an indexation fee of 4 per cent is applied— the student now owes $20,800.
Then, the next year, indexation is 7 per cent— that's applied to the $20,800, not the original loan amount.
So then that debt increases by $1,456.
Assuming the student hasn't made any payments in those two years, their debt has gone up to $22,256.
A key feature of the loan scheme is that students don't have to start paying off their debts until they earn more than a certain amount.
And this money should be deducted from each pay cheque by their employers.
However, their debts still increase with indexation each year even when they earn less than this threshold.
So if a graduate takes 10 years to work up to a point where they're being paid above the threshold, they don't start making an involuntary payment for a decade.
But their HECS debt has had a decade of indexation fees applied— meaning their debt will be higher than the original loan.
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What is indexation?
Indexation is a fee that is applied once a year — always on June 1 — and affects the overall amount of a person's HECS/HELP debt.
Indexation means that the price of something is changed in correspondence with an external factor.
In this case, the price of something is the student debt and the external factor is the CPI.
Each year, student loans increase based off the CPI percentage — which is a set of figures released by the Australian Bureau of Statistics (ABS) every three months to track the cost of living.
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Why is HECS indexed?
We went to ABC business editor Michael Janda to get his explanation on the purpose of indexation:
"Due to inflation, which is the tendency for the purchasing power of money to diminish over time, the 'real' value of HECS debts would shrink if they were not indexed.
"By indexing them by CPI, the government links the value of the debt to the most widely accepted measure of inflation and keeps their 'real' value constant."
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