The federal government is set to provide significant cost-of-living relief for Australians with student loans by altering the calculation of HECS debt indexation in the upcoming budget. Currently, HECS debts are annually indexed based on the Consumer Price Index (CPI) to ensure they keep up with inflation levels. However, recent spikes in CPI have led to substantial increases in student loan amounts, causing concerns that debts were rising faster than they could be repaid.
In a move to address this issue, the government plans to change the HECS indexation calculation to reflect the lower figure between the CPI and the Wage Price Index (WPI), a measure of wage growth. This reform, which will be applied retroactively from June 1, 2023, aims to mitigate the impact of last year's 7.1 percent indexation increase, reducing it to the WPI rate of 3.2 percent. As a result, an estimated $3 billion in student debt is expected to be eliminated for more than three million Australians.
The government's decision to adopt this reform follows the release of the Australian Universities Accord earlier this year, which highlighted concerns about the rising levels of student debt and recommended making HECS more straightforward and equitable. By backdating these changes, Education Minister Jason Clare aims to ensure that HECS debts do not outpace wage growth in the future, offering relief to students and graduates who were bracing for significant indexation hikes. Additionally, the proposed reform will benefit not only university students but also apprentices who owe money through programs like the VET Student Loan program, further easing financial burdens and barriers to education and training.