HECS-HELP debts increase with inflation

By Warren Strybosch

HECS-HELP debts in Australia are designed to increase with inflation to ensure their real value is maintained over time. The Higher Education Contribution Scheme (HECS) assists students in financing their tertiary education, allowing them to defer their tuition fees and repay them later through the Higher Education Loan Program (HELP).

Inflation refers to the general increase in prices over time, which reduces the purchasing power of money. To account for this, HECS-HELP debts are indexed annually to keep pace with inflation. This indexing ensures that the amount owed adjusts to the changing value of money, preventing the erosion of the debt's real worth. Consequently, borrowers are required to repay an amount that reflects the prevailing economic conditions at the time. Looking back over the last 10 years, we can see how low the HECS indexation rate has been until 2022 and then here has been a significant jump in 2023.

Whilst not great news for those students who are about to finish VCE and embark on a TAFE or university course and were considering accessing HELP loans, the good news is that the threshold that determines the income level at which borrowers are obligated to start repaying their debts has risen in line with inflation as well. The Government has released details of repayment incomes and rates for the HELP for the 2023-24 income year.

The minimum repayment income is $51,550 for the 2023-24 income year. For full details, see here. This means that individuals earning below this threshold are not required to make any repayments towards their HECS-HELP debts. However, once an individual's income surpasses this threshold, a portion of their income is automatically deducted through the taxation system to contribute towards the repayment of their debt.

By linking HECS-HELP debts to inflation and implementing a repayment threshold, the Australian government aims to ensure the accessibility and fairness of higher education funding, making it manageable for students while also maintaining the sustainability of the system.

However, with increased food prices and living costs, it is going to be hard for those students when they finish their courses to have to pay rent, food, other living costs and to add to that their HELP-HECS loans.

Financial Adviser