HECS Rise Impacts Millions of Aussies

The HECS rise has struck millions of people across the country, including many young Australians, subjecting them to a harsh increase in their student debt. 

Starting from June 1, individuals with outstanding HECS-HELP loans will face a substantial 7.1 percent surge in their debt, marking the most significant increase witnessed in the past 30 years.

HECS-HELP Debt: How Much is the Increase Expected in 2023?

how much is the increase

In line with the Consumer Price Index (CPI) or March 2023’s inflation rate, student debt has surged by 7.1 percent. 

The increase is applicable to all HELP debts that have exceeded 11 months of age, as indexation is not applied to student loans during the initial 11-month period.

While HECS-HELP debt remains interest-free, it undergoes annual indexation to account for inflation. In the previous year, the indexation rate reached 3.9 percent, but with inflation soaring, that figure has nearly doubled, exacerbating the financial burden for borrowers.

Due to recent alterations in the Help repayment thresholds, individuals with low incomes may find themselves making compulsory payments that are lower than the amount added by indexation when the indexation rate exceeds 1%. As a result, some individuals experience an increase in their debt despite fulfilling their payment obligations.

The Implications of HECS Rise

Indexation has several implications, with the most apparent being the 7.1 percent increase in the amount owed to the Australian Tax Office (ATO). 

For instance, if someone has a student debt of $28,500, they would owe the ATO an additional $2,021.50 as a result of this indexation.

Nevertheless, due to the calculation method for mandatory student loan repayments, which is based on income rather than the debt amount, your required payment per week or month will not increase unless your salary has also risen.

Another aspect affected by indexation is the adjustment of various mandatory repayment thresholds utilized to determine the portion of your income allocated towards debt repayment.

Below are the repayment thresholds for the 2022-23 financial year, presenting the “repayment income” on the left and the corresponding percentage of that income that must be allocated towards student loan repayment on the right.

Repayment thresholdRepayment rate
Below $48,3610.0%
$48,361 – $55,8361.0%
$55,837 – $59,1862.0%
$59,187 – $62,7382.5%
$62,739 – $66,5023.0%
$66,503 – $70,4923.5%
$70,493 – $74,7224.0%
$74,723 – $79,2064.5%
$79,207 – $83,9585.0%
$83,959 – $88,9965.5%
$88,997 – $94,3366.0%
$94,337 – $99,9966.5%
$99,997 – $105,9967.0%
$105,997 – $112,3557.5%
$112,356 – $119,0978.0%
$119,098 – $126,2438.5%
$126,244 – $133,8189.0%
$133,819 – $141,8479.5%
$141,848 and above10.0%

Remember that repayment income differs from your gross salary or take-home pay. It encompasses your taxable income along with additional factors such as investment losses (including rental losses), reportable fringe benefits amounts, reportable super contributions, and exempt foreign employment income.

Reasons Behind The Increase In HECS-HELP Debts

reasons behind the increase

On June 1 each year, indexation is applied to student debts, including HECS-HELP, and this is not a one-time occurrence for this year alone. While HECS-HELP debts are interest-free, they undergo indexation aligned with inflation to ensure borrowers repay the government an amount reflecting the true value of the loan.

According to Treasurer Jim Chalmers, in his statement back in April, he clarified that the annual indexation taking place in the middle of each year is a regular occurrence independent of the governing administration or other circumstances. As the Treasurer emphasized, this indexing process applies to various government programs, including payments, ensuring their alignment with relevant economic factors.

While HECS-HELP debts stand apart from other loans by being interest-free, they undergo indexing tied to inflation. This approach ensures that borrowers contribute the deemed true value of the loan back to the federal government.

“This indexation that happens around the middle of the year every year happens regardless of who’s in office or all the other circumstances, and like a lot of other government programs, including payments, it’s indexed,” Treasurer Jim Chalmers further explained.

Need Help?

We understand that the HECS rise can have a significant impact on your financial situation, and we are here to support you.

If you have any questions or concerns about the implications of the HECS-HELP debt increase, feel free to contact BloomWealth for expert guidance and assistance.

Leave a comment