Roughly 3 million eligible Australians will have their Higher Education Loan Program (HELP debt) and other student loans reduced under a cost-of-living measure announced in the lead up to the 2024 Federal Budget.
Currently, the Consumer Price Index (CPI) is used to calculate the indexation rate. The proposed reduction in indexation will be backdated to 1 June 2023 and will apply to loan balances for the 2023-24 income year onwards.
Annual indexation rise
Every June, the HELP and other student debts are indexed in line with CPI. This proposed measure will cap the indexation at the lower of the CPI or the Wage Price Index (WPI).
The indexation rate applied on 1 June 2023 was 7.1% and under the proposal, this would be reduced to 3.2% retrospectively.
The indexation rate to be applied on 1 June 2024 is projected to be 4.7 per cent and under the proposal, this would be reduced to a projected WPI figure of 4.0 per cent.
Savings for students
Since the previous year’s indexation rate of 7.1% will be lowered to 3.2% under the proposed policy students can expect the difference in the rates to reduce their outstanding student loan balances (details to be released in due course).
For example, a student with a HELP debt of $26,500 as at 1 June 2023, following the changes announced, will be eligible to receive credit of $1,190 across the 2023 and 2024 income years and a total debt reduction of $1,600 over the total life of the loan.
Next steps
Instead of the usual indexation hike each year, you can expect the receipt of a credit (due to backdating) that will reduce your overall outstanding student debt.
The debt relief will also apply to apprentices with outstanding debts through the VET Student Loan program or Australian Apprenticeship Support Loan.
Wider university reforms have also been proposed by the Labor government to help cost-of-living pressures and promote better education opportunities.
Please note, these measures are currently in the announcement stage and require parliamentary approval to become law.
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Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.