Indexation becoming a major strain for student loans

MARKETED as an interest-free loan for tertiary studies the HECS-HELP and FEE-HELP loans are far from a “free” loan.

Each year the loan is indexed and this year it is predicted that indexation may be as high as seven per cent.

Since 2013, indexation rates have varied between 1.5 per cent and 2.6 per cent each year with the largest increase last year of 3.9 per cent. With an estimated seven per cent rise on June 1 that means an additional $3500 to a $50,000 loan or incredible $7000 to a $100,000.

The Federal Government’s Education website states:

‘HELP debts are indexed annually [HESA section 154-25] to maintain their real value, by adjusting them in line with changes in the cost of living as measured by the consumer price index, otherwise they are interest-free.’

According to the Greens report, ‘more than three million Australians currently owe in excess of $74 billion in student debts.’

Whilst some who supported the freeze of indexation on student loans supported a raise in the minimum repayment income, others with student debts were happy to decrease the minimum repayment income – ultimately paying more off sooner.

The Sentinel Times spoke with Bass Coast CUC student, Nick Gartland about how the bill being quashed affects him.

“I’m pretty disappointed,” Nick said.

“When I was looking at it all and seeing that it was a seven per cent rise coming up, I was pretty excited if they froze it. It’s going to have a big effect on me personally.

“It’s also pretty disappointing to see that the government has not thought about the students who are sitting there with no income and a rising HECS debt.”

With a Bachelor in Community and Human Services completed, and currently studying a Master’s in Forensic Behavioural Science, Nick is fortunate to be juggling his studies alongside a full time job, but that doesn’t make balancing the combination any easier.

“When I was looking at my finances having a seven per cent increase on my HECS is not great because it is going to affect my future income, and affect how I am able to budget in the future.

“At the end of the day, I’m just going to get indexation, that’s going to add more to what I am trying to pay off; and probably make it longer for me to pay off which I am not happy with to be honest, nor anyone else I reckon.”

Nick’s comments are echoed in the report with people highlighting that after indexation, they are lucky if their repayments see a positive deduction. For an estimated 71,000 people with debts over

$100,000 chances are indexation is rising higher than their repayments.

For one individual who wished to remain anonymous their student debt rose by $4662.60 the last financial year with repayments coming to $4249.53 – a difference of $413. A seven per cent indexation would see $8589 added to their HECS debt.