Major changes to the way student debt is calculated in Australia passed through parliament on Tuesday night.
Three million Australians will see $3 billion wiped from their student debt as the new indexation rate is backdated, while those who completely repaid their student debt after the 2023 or 2024 indexation was applied will have refunds deposited to their bank accounts.
After inflation surged last year, the HECS indexation rate skyrocketed to 7.1 per cent, triggering an uproar as students saw their debts spiral.
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While the HECS indexation was previously based on the Consumer Price Index (CPI), The Universities Accord Bill 2024 now caps the HECS indexation rate to the lower of either the CPI or the Wage Price Index (WPI).
“We have backdated this reform to last year. This wipes out what happened last year and makes sure it never happens again,” Federal Education Minister Jason Clare said.
Another 20 per cent cut to student loans, a raising of the minimum repayment threshold, and further cuts to repayment rates were also promised for 2025 — but only if the Labor Party is returned to office at next year’s federal election.
However, National Union of Students president Ngaire Bogemann previously slammed the HECS cuts plan for failing to go far enough, saying it avoids addressing the root cause of the problem, which she said was indexation.
And leading economist Chris Richardson said the HECS cut failed the fairness test.
How will the new rates be applied?
The 2024 indexation rate, currently at 4.7 per cent, will be lowered to 4 per cent, the Department of Education said.
And the eye-watering 7.1 indexation rate from 2023 will be reduced to 3.2 per cent.
Recalculations based on the amended indexation rates will be backdated to June 1, 2023.
The change applies to HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loans.
How much money will I get back?
The average HECS debt sits at around $27,000 according to Clare, who said that the refund for outstanding loans of this size would be about $1200.
The refund will be based on the size of your debt as it stood at the end of the last financial year.
It will also vary depending on any repayments made during the year.
“All HELP debts that were indexed in 2023 and 2024 will receive an indexation credit,” the Department of Education said.
Estimated refund values can also be calculated based on specific debt figures using the HELP Indexation Credit Estimator.
How and when will I get the refund?
The changes made in parliament were announced on May 5, and the government said in October that they would come into effect once the legislation was passed.
But the Department of Education has not since specified a day that Australians can expect the refunds to be processed.
“This work will happen as soon as possible,” it said.
The refunds will be automatically applied by the Australian Taxation Office (ATO) directly to any outstanding student debts as credits.
For those who paid off their student debts completely in 2023 or 2024, and who have no other outstanding government debts, the ATO will deposit the refund directly into their bank accounts.
Legislation supports new Prac Payment
The new bill will also support students undertaking the mandatory placements required in teaching, nursing and midwifery, and social work courses.
It also supports nursing students studying at TAFE.
The weekly $319.50 payment will be available from July 2025 for about 68,000 eligible students while they are on placement.
“The payment will be means-tested to target students who need it the most,” the Department of Education said.