HECS debts set for $1250 setback following fresh inflation figures
Higher-than-expected inflation figures released today aren't just bad news for home- and business owners banking on an early interest rate cut; they're concerning for the more than 2.9 million Australians with student debt.
The consumer price index (CPI) determines how much HECS-HELP and all other student debt increase under the annual indexation that takes place on June 1.
While the Australian Taxation Office is yet to complete its calculations for this year, today's inflation data means the indexation rate is likely to be around 4.7-4.8 per cent – the second-highest figure since 1990, behind only last year's 7.1 per cent.
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Students will see their debt increase by about 4.75 per cent on June 1. Louie Douvis/AFR
Finder has estimated indexation will be 4.75 per cent, while fellow financial comparison site Mozo has put the figure at 4.7 per cent.
The Greens, who have repeatedly called for indexation to be scrapped, say it will come in at 4.8 per cent this year.
Under any of those scenarios, someone with the average Australian student debt of $26,494 will owe an extra $1245 or more on June 1.
As for the roughly 1 per cent of student debtors who still have $100,000 or more to pay back, they'll see their debt increase by at least $4700.
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"Students are understandably on edge about another indexation surge, but understanding how student debt works can alleviate some of the anxiety," Finder head of consumer research Graham Cooke said.
"While inflation is easing, indexation will still lead to increased student loan balances, emphasising the need for proactive budgeting and repayment strategies."
According to a Finder survey, more than 60 per cent of students are slightly or extremely concerned about their ability to repay their debt, up almost 10 per cent from last year.
It also found 12 per cent don't think they'll ever be able to repay their entire loan.
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Treasurer Jim Chalmers has flagged that student debt relief could be included in next month's budget. Alex Ellinghausen/SMH
As of the 2022-23 financial year, Australians owed a combined $78.2 billion in HELP debt.
Both Prime Minister Anthony Albanese and Treasurer Jim Chalmers have hinted at providing some form of student debt relief in the federal budget.
The official indexation rate is set to be released early next month, with the budget to be handed down on May 14.
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