By Grace Frost
University students in the City of Whittlesea are set for a steep rise in student loans following confirmation of the Australian Taxation Office’s increase of 7.1 per cent on June 1 – the highest indexation recorded since 1990.
Though no interest is charged on Higher Education Loan Program, HELP, loans, indexation is added to debts once a year in line with inflation and cost of living to ensure the debt ‘maintains its real value’.
Indexation rates remained within 0.6 and 3.9 per cent between 2002 and 2022.
This year, rates are set to spike above five per cent for the first time in two decades.
The 7.1 per cent indexation will mean the average student loan in Australia will increase by more than $1600.
The average HELP loan debt across Australia has increased by more than 55 per cent between 2012 and 2021, from $15,191 to $23,685.
As of 2020, there were 8928 taxpayers in the City of Whittlesea with a HELP loan repayment, compared to 3214 in 2015.
Surrounding municipalities had significantly lower figures, with 1814 taxpayers in the Macedon Ranges, and 1546 in the Mitchell Shire having a HELP loan.
Federal Member for McEwen Rob Mitchell said the issue of high indexation had stemmed from inflation and Labor was ‘doing everything they can’ in the Federal Budget 2023 to look at cost of living relief.
“One of our key focuses is trying to get inflation down without […] just injecting cash into the economy, which then drives interest rates up,” he said.
“[Indexation might be] seven per cent this year, but our goal is to get it back to two to three per cent.”
The Higher Education Contribution Scheme, HECS, HELP loans remain income-contingent, with people earning below $48,361 this year not required to make a repayment.
People earning above the threshold will have to make a repayment between one and 10 per cent of their total income, depending on how much they earn.
Australian Taxation Office data shows the average length of time to repay student loans in full had increased from 8.2 years in the 2011-12 financial year to 9.5 years a decade later in 2021-22.
The average length of time to make a first voluntary repayment has also increased in recent years, rising from 7.1 years in 2011-12 to 7.7 years in 2021-22.
Mr Mitchell encouraged people who had the ability to pay some or all of their student loans to do so before June 1 to save money in the long-term.
On the average debt of $23,685, a voluntary repayment of $1000 prior to June 1 would see a saving of approximately $70 in long-term repayments.
“To me, it’s like a lot of loans, whether it’s a mortgage, car loans – the quicker you pay it off, the less interest you pay, the better off you are,” Mr Mitchell said.
“If people can [make voluntary repayments], that’s great. There are people that won’t be able to do that at the moment, and that’s why we’re doing everything we can to try and reduce the cost of living in a way that doesn’t push more pressure on inflation.”
The indexation will apply to HELP loans, VET student loans, student financial supplement scheme loans, student start-up loans, ABSTUDY student start-up loans, ABSTUDY SSL and trade support loans.
People can view their student loans and make repayments via the Australian Taxation Office.