HECS Indexation Changes Cut $3 Billion in Debt: How Much Will You Get Back?

After months of anticipation, the Federal Government’s changes to the HECS indexation rules have finally become law, passing through Parliament on Tuesday night.

Under the new legislation, the annual indexation of student loans will be capped at the lower of either inflation or wage growth.

This change, which takes effect retroactively from June 2023, will reverse the 7.1% increase in student debts caused by last year’s indexation.

As a result, some individuals will receive a credit on their loans, while others could see a refund directly in their bank accounts.

The reforms are expected to reduce student debt by $3 billion, benefitting an estimated three million Australians.

What is HECS?

HECS-HELP is a government loan designed to assist students pay their student contribution amount. To access it, students must be enrolled in a Commonwealth supported place (CSP), where the government covers part of the fees.

The remaining portion is called the student contribution amount, which can be paid using the HECS-HELP loan, with the government paying it directly to the education provider. Repayment starts once the student’s income reaches a set threshold.

The minimum repayment threshold for HECS-HELP loans in 2024–25 is set at $54,435. Therefore, individuals earning above this amount will be required to make compulsory repayments.

New Legislation Caps Indexation on Student Debt

For the past thirty years, HECS/HELP loan repayments have been indexed according to the Consumer Price Index (CPI).

The Universities Accord (Student Support and Other Measures) Bill 2024 introduces changes to the way indexation is calculated on student debt, with the new rules backdated to 1 June 2023.

Last year, indexation saw its largest increase since 1990, with a 7.1% rise, placing significant financial pressure on students as their loans grew faster than their ability to repay.

The new legislation caps indexation on HELP, VET Student Loans, Australian Apprenticeship Support Loans, and other student debts at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI).

This follows a review of the higher education system aimed at limiting debt increases during high inflation.

As a result, the 7.1% spike in 2023 will be reduced to 3.2%, based on the WPI.

Credits will be issued via the ATO, ensuring future indexation aligns with wage growth, easing the debt burden for students.

What does this mean for you?

For a student with an average HELP debt of around $27,000, these changes could see around $1,200 wiped from their outstanding loan balance.

The Australian Tax Office (ATO) will automatically apply these changes to all borrowers with student loans, and the adjustments will be made as soon as possible.

If you’ve already paid off your student debt after the 2023 or 2024 indexation was applied, you may be eligible for a refund.

The credit will be issued directly to your bank account, provided there are no outstanding government debts.

*Actual credit amount will vary depending on individual circumstances including repayments made during the year. All HELP debts that were indexed in 2023 and 2024 will receive an indexation credit.

Australians with a HELP debt can find out how much this is estimated to benefit them using the HELP Indexation Credit Estimator here.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI. Now that legislation has passed, the ATO will automatically apply these credits as soon as possible,” Minister for Education Jason Clare said.

Clare also noted that, if Labor wins the next election, they plan to further reduce all student debt by 20 percent and implement fairer repayment terms.

According to a government release, the relevant legislation has passed Parliament, and the revised indexation rates will be automatically applied to individuals’ loans by the Australian Taxation Office (ATO).

How to check your HECS balance

The easiest way to check your HECS balance is through your MyGov account, a digital portal that connects you to various government services, including the Australian Taxation Office (ATO).

You can access MyGov either online or via the app.

To check your HECS balance:

1. Log in to your MyGov account.
2. Click on the “Services” button.
3. Select the Australian Taxation Office (ATO) icon.
4. Scroll down to the “Loan Accounts” section.

If you have a student loan, you’ll see a line under “Description” that says “Higher Education Loan Program (HELP).” The amount listed under “Balance” is the remaining amount you owe.