Crusader MP responds as young Australians claim $3 billion HECS lifeline for millions ‘not enough’

Australians saddled with suffocating HECS debt are still worried a plan to cancel $3 billion in student loans won’t be enough to help them. The 2024 federal budget includes a plan to change the way student loans are indexed, which will remove about $1,200 from the average Australian’s HECS-HELP debt.

Yahoo Finance is overrun by people who feel burdened with their student debt. Some tried their hardest to pay it off, while others felt helpless as their balances rose despite regular payments.

The proposed changes have been welcomed by many, but some, including a young Australian teacher, said the government “needs to do a lot better”.

Are you struggling with your HECS debt? Email [email protected]

The Tasmanian teacher did a double degree in college and graduated with student debt of just over $34,000. Five years later, she has paid $17,365 toward her HECS debt.

Frustratingly, when she heard the announcement and checked her account, she discovered she still owed $27,530.

“The entire education system from kindergarten to tertiary needs an overhaul because it is not serving its purpose,” she said on TikTok.

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“It doesn’t work for us anymore. Do better in Australia.”

She, like many prospective college students, said she didn’t fully understand the financial commitment she made when she applied to the HECS program.

The Tasmanian said she now feels she was told a lie, that her course would be “basically free” and that refunds would not haunt her for years after she finished.

She is not alone in her frustrations with Labour’s plan to change the way HECS is indexed.

“It’s a start, but I don’t think it’s enough that they have to change when the index is indexed and when our withheld principal payments are applied to the loan,” one person said.

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“I think they should do more, it’s still a thing but it’s not much of a change. Like people are still going to struggle financially,” wrote another.

“Not gonna lie, it doesn’t give me much hope that I’ll be able to pay off my debt anytime soon,” a third added.

HECS indexation reform ‘just the first step’: ‘Much still needs to be done’

Teal MP Dr. Monique Ryan has led a campaign for the Albanian government to change the way HECS operates.

Her petition gathered nearly 300,000 signatures and while she said the $3 billion plan was a victory, she said more needs to be done.

“I think this was really just the first step, and there is still a lot to do in the HECS area that the government has indicated that they are considering and will hopefully put on the agenda in the next short period of time,” she said. Yahoo Finance.

She would like to see the government address the following areas:

• Get rid of the job-ready graduation package: This was introduced by the Morrison government in 2021 to encourage people to choose university courses that met real market demand, such as teaching and nursing. But it saw the cost of courses that were in low demand, such as arts courses, skyrocket.

• Unpaid placements: Ryan said the government’s announcement to charge $320 weekly for certain courses requiring practical placements was a good step, but it needs to be more funded and rolled out at more levels.

• Change the date for indexation: HECS is currently indexed on June 1. Ryan said this is an “inappropriate” time of year because it means their student loans for the previous year will be indexed, regardless of what they have paid in the past twelve months. The MP told me Yahoo Finance that the indexation date should be postponed to after the start of the financial year, and not before the end of the previous one.

• Banks need to change the way they assess HECS: If someone wants a bank loan, the lender will assess how much HECS debt he or she has, and this can sometimes be as much as $100,000 from their borrowing power. Ryan said student loan debt needs to be looked at differently to make it fairer for people trying to buy a house or a car.

She said those unhappy with the government’s plan should sit tight as more changes could happen soon.

“This is just the beginning of a major change in our HECS system,” Ryan said Yahoo Finance.

“I think it is time for a major overhaul of something that is no longer fit for purpose and does not currently reflect the ambitions of the system when it was launched in 1989.”

How the government’s HECS overhaul will work

HECS debt is currently linked to the Consumer Price Index (CPI) and was due to be indexed at 4.7 percent on June 1 this year.

It was a blow to Australians, who saw their student loans rise by 7.1 percent last year and 3.9 percent the year before.

Under the government’s proposal, which has yet to be adopted, HECS will be indexed to the CPI or the wage price index (WPI), whichever is lower.

This plan would be retroactive to June 1 last year, reducing the record inflation rate of 7.1 percent to just 3.2 percent, in line with the WPI.

Education Minister Jason Clare said the move would provide much-needed relief to those struggling with the collective debt of more than $74 billion.

“An individual with an average HELP debt of $26,500 will have about $1,200 of their outstanding HELP loans erased this year, pending passage of the legislation,” the government said.

Here is an estimate of the benefits:

*The actual amount of credit varies depending on individual circumstances, including repayments made during the year. All HELP debts that are indexed in 2023 and indexed on June 1, 2024 will receive an indexation credit.

The relief will also apply to apprentices with debt through the VET Student Loan program or the Australian Apprenticeship Support Loan.

What happens if I have already paid off my HECS debt?

Many Aussies worked extra hard to pay off their student loans by throwing money on top of their regular payments.

Some are putting in tens of thousands of dollars to drastically reduce or completely pay off their HECS and are now wondering what the government’s plan means for them.

Fortunately, it’s not all wasted money.

“Those who paid off their outstanding HELP loans between June 1, 2023 and the time the legislation is passed will be eligible for a tax credit,” a spokesperson confirmed.

People who have paid their HECS loan in full will get their indexation credit back in cash if they have no other tax liability when they file their tax returns this year if the Government’s proposed legislation is passed.

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