Three million Australians who have a student loan are about to be saddled with a nasty bump in the amount they owe, thanks to soaring inflation.
While HECS or HELP loans do not attract interest like a credit card, they are pegged in line with inflation through a process called indexation.
Each year in June, student debts are adjusted to account for inflation.
This year, the indexation rate is predicted to be about 7 per cent, according to modelling shared by Greens Senator Mehreen Faruqi.
On an average $25,000 student loan, this would add an extra $1500 in debt.
A Senate inquiry is currently examining a bill introduced by Faruqi which would freeze student debt and raise minimum repayment income thresholds.
The income level at which Australians are required to begin paying off their HELP debt also rises with inflation - for the 2022–23 income year it was $48,361.
"In 2023, young university graduates will be the worst affected by the largest increase in student debt indexation in decades,'' the National Union of Students said in a submission to the inquiry.
"Students and graduates need immediate financial support to combat the cost of living crisis by pausing indexation on HELP debt repayments."
According to last year's federal budget papers, total student debt reached $47.4 billion in June 2022.
The average time it takes to repay a HELP debt is now almost a decade - 9.6 years.
Victorian teacher Tias Allard, 36, said he had been left with a huge student debt of $62,500 after completing several degrees in psychology and linguistics at university, including a PhD in the latter.
Allard said he initially planned to get a job in psychology, but this hope was scuttled when he was not accepted to study for his masters degree.
His debt, however, remained.
After being unemployed for much of the pandemic, Allard is now working as an ESL (English as a second language) teacher, which requires a one-month certification course.
If his student loan is indexed at the expected rate of 7 per cent in June, he will be saddled with another $4375 in debt.
Last year, indexation added 3.9 per cent to Allard's loan, meaning his debt increased even after his yearly repayments were deducted.
Allard said his student loan was adding to the financial stress felt by him and his partner.
"Every day, I wake up and it's the new worst day in history to be looking for a place to live. At the same time, my study debt is continuing to soar," he said.
"I doubt I will be able to keep up with the indexation.
"Mostly, I just feel stupid for believing what I was told as a child that I needed to go to uni for a good job, only to end up with a debt that goes up $2500 a year because some people who got free educations thought it would be fair to saddle subsequent generations with life-long debt for the same privilege."
Allard said it was especially galling to see his student debt increasing by so much at a time when wages were stagnating and banks were offering interest rates at below inflation levels.
Melbourne mum Chrissie, who asked for her surname to be withheld, has a student debt of more than $65,000.
Not knowing what she wanted to do after leaving school, Chrissie tried many subjects at university.
Source link: https://www.9news.com.au/national/millions-of-aussies-with-hecs-help-student-loans-to-be-hit-with-more-debt-thanks-to-indexation/65d77efa-bda7-435e-9df7-8ed92c5acac3 | https://www.9news.com.au/national/millions-of-aussies-with-hecs-help-student-loans-to-be-hit-with-more-debt-thanks-to-indexation/65d77efa-bda7-435e-9df7-8ed92c5acac3