Labor proposes indexation changes to erase $3 billion from student debts

Labor proposes indexation changes to erase $3 billion from student debts
Image: Minister for Education Jason Clare (AAP Image/Mick Tsikas)

by CHRISTINE LAI

 

The government’s upcoming budget will see approximately $3 billion in student debts slashed in its plans for cost-of-living relief. This reversal of last year’s indexation increase will deliver an average saving of $1,200 per individual.

Last week, the release of high inflation figures by the Australian Bureau of Statistics (ABS) left millions of students concerned over the estimated second-highest ever student debt indexation.

The figures indicated a 4.8 per cent increase in their HECS as a result of indexation.

For the past three decades, HECS/HELP loan repayments have relied on the Consumer Price Index (CPI) for indexation calculation.

Last year witnessed the highest increase in indexation, with a rise of 7.1 per cent, placing many students under financial strain as loans outpaced repayment capacities.

Indexation reversal brings relief to students

Under the new policy, annual HECS indexation will be determined by whichever figure is lower between the CPI and the Wage Price Index (WPI).

The proposed change, requiring legislation, would have a retrospective effect, being backdated to June 1, 2023. This move effectively reverses the impact of last year’s indexation rate, which surged to 7.1%, marking the highest increase in over a decade.

This policy adjustment will now retroactively reduce last year’s 7.1 per cent indexation to match the WPI rate of 3.2 per cent.

Education Minister Jason Clare highlighted that the decision to reverse last year’s record indexation was a direct recommendation from the Universities Accord final report, released earlier this year.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI.”

“We are doing this, and going further”, he said in a statement.

The reform would also apply to this year’s indexation rate, estimated at 4.8 per cent.

Individuals with the average Australian student debt of $26,494 were anticipated to see their debt increase by $1,272 or more by June 1st, along with a 5.9 per cent rise in education costs.

However, following the announcement of the indexation reversal, this measure is projected to lead to a reduction of approximately $1,200 from their outstanding HECS/HELP debt this year.

“By backdating this reform to last year, we’re making sure that apprentices, trainees and students affected by last year’s jump in indexation get this important cost-of-living relief,” Skills and Training Minister Brendan O’Connor said in a statement.

Recommendations from the Australian Universities Accord

The Australian Universities Accord final report released 47 recommendations which advocated for additional cost-of-living measures, such as providing a stipend for unpaid mandatory placements, abolishing the former federal government’s unsuccessful Job Ready Graduates Scheme, and decreasing student contribution amounts for low-income earners.

Other recommendations included setting participation targets at universities for under-represented groups, backed by needs-based funding for universities, as well as enhancing learning and teaching effectiveness and improving student income support.

Additionally, the government was urged to increase the availability of fee-free places. This could involve expanding Commonwealth supported places to accommodate student demand and ensuring that funding for preparatory places aligns with the cost of delivery.

The announcement comes amidst ongoing debates surrounding the affordability and accessibility of tertiary education in Australia.

The Greens have been pushing for the elimination of student debt, arguing that education should not be a financial burden on individuals.

In a prior statement addressing the anticipated 4.8 per cent increase, Senator Mehreen Faruqi emphasised, “Anything less than scrapping indexation in the May budget is a betrayal to students. It is obscene that Labor is making billions off students while handing big subsidies to the climate wrecking fossil fuel industry”.

A recent petition from MP Monique Ryan calling for indexation changes has received more than 285,000 signatures.

The government’s budget is scheduled to be delivered on May 14.

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