In a significant move to support Australian students and graduates, the federal government has announced plans to wipe around $3 billion in student debt and offer tax credits to those who have already paid off their loans. The changes, which will be included in next week's Budget, are a response to the Australian Universities Accord and aim to provide relief to more than three million Australians with student debt.
Starting from June 1, 2023, the government will cap the HELP indexation rate to be the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI). This change will be backdated to all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other student support loan accounts that existed on June 1, 2022. By doing so, the government will remove last year's spike in the CPI indexation rate of 7.1% and prevent debt growth from outpacing wages in the future.
For individuals with an average HELP debt of $26,500, this change will result in around $1,200 being wiped from their outstanding HELP loans this year, pending the passage of legislation. The 2023 indexation rate based on WPI would have been only 3.2%, significantly lower than the CPI rate.
In addition to the debt relief, the government will also offer tax credits to students who have already paid off their loans to avoid the high indexation rates. Those who paid off their outstanding HELP loan between June 1, 2023, and the time the legislation is passed will be eligible for a tax credit, ensuring they also benefit from the reform.
The government has created the HELP Indexation Credit Estimator to help Australians with student loan debt understand how much they may benefit from these changes. This tool will allow individuals to estimate the potential savings they can expect based on their specific circumstances.
The reform is part of the government's response to the Universities Accord, the first comprehensive review of the higher education system since 2008. Education Minister Jason Clare emphasised that implementing all of the recommendations from the accord will take a decade or more, and the current announcement represents the first stage of the government's response.
The changes to student loan indexation and the introduction of tax credits for those who have already paid off their debt are expected to make a significant difference to students and graduates across Australia. As the government continues to work on implementing the recommendations from the Universities Accord, further support and reforms for the higher education sector are anticipated in the coming years.
