Major changes to HELP/HECS debt repayments for university students could be on the way

Major changes to an “outdated” university loan repayment scheme have been recommended in an independent review into universities published on Friday.

Relief for graduates could be allocated as soon as the May Federal Budget, according to Education Minister Jason Clare, who hinted at annual repayment savings of up to $1000 for some Australians, in response to the report.

HECS-HELP repayments currently work by allowing students to defer the costs of their studies until they earn a specific salary, with that threshold currently set at $51,550.

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Payments are then withheld from each salary payment, but those withheld payments are only deducted from the overall HECS-HELP loan balance once a year. Indexation is also applied to the loan balance, and that can cause the owed amount to skyrocket before the already withheld payments have even been deducted.

This common graduate gripe — which stunned students last year as the CPI rose by 7.1 per cent before the withheld payments of 2023 had been applied — is central to recommendations made by the Australian Universities Accord report.

“Cost-of-living pressures and higher than usual inflation rates have increased concerns about the HELP system,” the review said.

“Higher levels of HELP indebtedness, and the public debate about these developments, risk deterring some people from seeking higher education at exactly the time we need growth in participation.

“Changes have been recommended by the review to change the timing of indexation to deduct compulsory repayments first.”

Independent MP Allegra Spender said the current HECS-HELP repayment system wouldn’t be tolerated in other lending channels.

“We wouldn’t accept a bank charging you interest on a full mortgage when you’ve already paid it down,” she said.

Clare said that the department would begin costing and prioritising changes in the coming months, with some potentially possible in the next Federal Budget depending on the timing of Expenditure Review Committee processes.

Minister hints at $1000 savings

Clare also said that the department would consider, in the coming months, annual relief payments of up to $1000 for some low-income graduates fresh out of university.

He hinted at a yearly benefit that would equate to annual repayment savings of $1000 for graduates that earn a salary of $75,000.

This is one measure which could address the Accord report calls for inadequate income support to increase in line with students’ needs, specifically the needs of First Nations students, students from low socio-economic backgrounds, and regional, rural and remote students.

“People’s HELP loans do not grow faster than wages,” the report said, further recommending the financial burden for low-income earners “particularly women and those just starting out in their careers” be reduced.

“Income support payments for students have not kept pace with wages or the needs of students — resulting in a smaller proportion of students now receiving income support,” the review said.

“The Review recommended adjusting current arrangements to prevent cost-of-living pressures deterring people from studying.”

Clare said that the list of changes recommended by the review are bigger than one budget.

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