Inflation-driven higher education debt increases to hit millions of Australians

Even under the most conservative scenario, modelling suggests average Help debt will increase by at least $1700 when indexed on 1 June

Millions of Australians with Higher Education Loan Program (Help) loans could face thousands of dollars in extra debt this year as soaring inflation hits the education sector.

Independent modelling provided to Guardian Australia suggests Australians with an average Help debt of $24,770.75 will face an increase of at least $1,700 when it is next indexed on 1 June, assuming, as is likely, that living costs remain high.

The Higher Education Loan Program – previously the Higher Education Contribution Scheme (Hecs) - is tied to inflation, increasing proportionately in line with the consumer price index (CPI). Inflation is currently growing at 7.8% – the fastest pace since just before the 1990s recession.

Indexation of debts occurs annually on 1 June. With inflation at its current rate, they’re forecast to be indexed by at least 7%.

A calculator developed by the Parliamentary Library for Greens senator Mehreen Faruqi shows a number of possible scenarios.

Under the first scenario, in which the March 2023 quarterly growth rate is the average of the previous three-quarters (1.82%), the indexation rate would be 7.19%, meaning an average Hecs-Help debt would increase by $1,781.15.

For the 585,000 people with debts in excess of $40,000 or more in 2021-2022, their debt would increase by $2,876.21.

The second scenario places the March rate on par with the December quarter, which was slightly higher at 1.87%. In this instance, the indexation would be 7.20%, meaning an average Hecs-Help debt would increase by $1,784.50.

Under the most conservative scenario where the growth rate is the same as the December quarter 2021 (1.34%), indexation would rise by 7.06%. This would cost students with an average debt an increase of $1,748.99.

How Help debt will increase according to indexation rate and amount of current debt

The Greens are calling for indexation on higher education debts to be scrapped, and for the minimum repayment income amount to be lifted in order to alleviate cost-of-living pressures on students and graduates.

The compulsory Help repayment threshold currently sits at $48,361, with the amount required to be repaid adjusted upwards as income increases. The average Australian wage is currently $52,338.

The Greens spokesperson for education, senator Mehreen Faruqi, said student debt had “exploded” over the past decade, while more graduates were bearing the burden of paying off loans.

About 2.9 million Australians currently owe a share of more than $68.7bn under the Help.

Data from the Australian Taxation Office (ATO) shows that over the past two decades, the proportion of debts worth over $10,000 has steadily increased. In 2005, the percentage of Help debtors who owed more than $10,000 was 47.51%. It is now more than 72%.

“We have to tackle this urgently,” Faruqi said.

“The government can’t just shrug their shoulders and allow this to happen. We need swift intervention to address the student debt crisis impacting so many people.”

Faruqi introduced a private senator’s bill into parliament in November that would abolish indexation on higher education debts and raise the minimum repayment income to the median wage.

Before parliament rose in December, a Senate Education and Employment Legislation Committee inquiry was established, with submissions closing on 24 February.

“Abolishing indexation on student debt and raising the minimum repayment threshold would be a good start, and provide much needed money in people’s pockets at a time when they are struggling to make ends meet or pay rent,” Faruqi said.

“Ultimately, we have to treat education as a right, not a privilege, and make Tafe and university fee-free.”

A spokesperson for the Department of Education said the Job Ready Graduates Scheme, which sets out university funding, would be reviewed as part of the federal government’s upcoming universities accord.

“Help reduces the upfront cost barriers to education by providing income contingent loans allowing people to find better employment and increased wages,” the spokesperson said.

“The Help scheme does not require a person to make a repayment until they are earning above the minimum repayment threshold.

“People experiencing hardship are able to apply to the ATO to defer their repayments.”


Caitlin Cassidy

The GuardianTramp

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