$3 Billion in HECS-HELP Debt to be ‘Wiped Out’ by Federal Government

Can we get a yeehaw 👌

If you have a HECS debt, you’re about to see hundreds of dollars wiped from it thanks to an announcement from the federal government on Sunday.

Over 3 billion students will see $3 billion wiped from their HECS debt.

Federal Education Minister, Jason Clare announced that this is just one of the plans the government will put in place to help with cost-of-living relief in the upcoming budget.

These changes are to stop HECS loans from growing faster than wages.

Under what Mr Clare announced, the way indexation is calculated is now changing. So, what are these changes?

Background info: how will indexation on HECS work now?

HECS indexation every year is usually calculated based on the Consumer Price Index (CPI).

Now, annual HECS indexation will be calculated based on whichever figure is lower: the CPI or the Wage Price Index (WGI).

If you’re a bit confused, we feel you. But DW, we did the research and have broken down what these two terms mean:

• CPI: This measures household inflation and includes statistics about price changes for categories of household expenditure. It’s calculated by the Australian Bureau of Statistics (ABS) who collect the prices of thousands of items which are grouped into 87 categories and 11 groups.
  • These could include items such as health, transport, recreation and clothing.
  • Every quarter the ABS calculate the price changes of each item from the previous quarter and compare them to what they were. They then add up all these changes to see how much the overall cost-of-living has gone up or down.
• WPI: This measures the changes in wages and salaries in the Australian labour market over time.

Similarly to the CPI, it follows changes in the hourly rate paid to a fixed group of jobs.

How much money is being ‘wiped’ from the debts?

The wiping of student HECS debts will be backdated to June 2023.

You know, around the time when we all got that 7.1% increase to our HECS.

Based on the new system of indexing, our HECS debts will be based on what’s lower, the CPI or WPI, this means last year’s WPI of 3.2 per cent will be applied to our HECS debts, not the CPI of 7.1 per cent.

Why are these changes happening?

After the 7.1 per cent spike last year, it saw lots of Aussies struggle during a cost-of-living crisis.

And earlier this year, the Universities Accord report recommended the government index HECS-HELP loans based on whatever is lower out of the CPI and WPI.

The federal government is following their advice and Minister Clare said on Sunday this will wipe out $3 billion in student debt.

“We are doing this, and going further. We will backdate this reform to last year,” he said.

“This will wipe out what happened last year and make sure it never happens again.”