Millions of university students across Australia will save $1,200 on debt repayments thanks to measures to reduce the cost of living.
The Federal Government announced changes on Sunday that will reduce the indexation of the Higher Education Contribution Scheme (HECS) and the Higher Education Loan Program (HELPS).
The cost savings are expected to be announced in the Budget on Tuesday, after it is presented to Parliament, and will help more than three million people reduce the cost of repaying their loans.
Millions of students, including trainees and apprentices (pictured), will have their student debt reduced after the Government announced on Sunday that the indexation rate would be reduced.
The move could mean up to $3 billion in student debt would be erased, helping university students, apprentices and interns pay off their debt.
On average, the amount students owe to the ATO will be reduced by $1,200 from their HECS and HELP debt.
The change will apply to all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed as of June 1 last year.
Indexation rates are added to the loans that students take out to finance their higher education.
The rate is added to a HECS or HELP debt to account for changes in the price of goods and services, which is measured in Australia by the Consumer Price Index.
Federal Education Minister Jason Clare says the government will change the way student loan indexation is calculated.
“The Universities Accord recommended indexing HELP loans to whatever is lowest outside of the CPI and WPI. We are doing this and going further,” he told Newscorp.
The government also backdated the change to June 1 last year, meaning all indexed student debt in 2023 will also be reduced.
This measure was recommended by the University Accord which was set up to conduct a study into the higher education system in Australia.
The indexation rate this year, which is 4.75 per cent, will be reduced to 4 per cent and the combined savings will take $1,200 off an average HELP loan of $26,500.
“We will backdate this reform to last year. This will erase what happened last year and ensure it never happens again,” Mr Clare said.
Students with larger debts, such as those with HELP debt of $50,000, will see their repayments reduced by $2,245.
The Government is set to outline the cost savings in the Budget this month (pictured left, Prime Minister Anthony Albanese and right, Education Minister Jason Clare)
The move will also reduce student debt that was indexed in 2023, with the combined savings reducing repayments by $1,200 on an average HELP loan of $26,500 (photo of university students on campus).
Skills and Training Minister Brendan O’Connor said that by backdating this reform to last year, the government was ensuring that last year’s indexation increase would benefit from tax relief. Cost of life.
“This continues our work to alleviate cost of living pressures and reduce and remove financial barriers to education and training,” he said.
The indexation rate reached a massive 7.1 percent last year, while inflation reached an annual rate of 7 percent in the first three months of 2023.
Students owed $78 billion in HECS and HELP debt last year, according to ATO figures, representing an increase of $4 billion on the previous year.
HECS and HELP are loans that students can take out to pay their tuition fees, with the amount funded by the government which must then be repaid.
Domestic students are eligible to access the program for Commonwealth financial support.
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