HECS/Help increase the debt for millions of Aussies

College graduates will each add an average of $1,500 to their student loans this year, adding $4.5 billion to the treasury.

Higher Education Loan Program (HELP) debt, established as HECS in 1989, does not accrue interest, but is adjusted for inflation on June 1 of each year, known as indexation.

Australia’s three million graduates with outstanding loans this year will see their biggest indexation surge in decades, according to the National Union of Students.

The union is due to address a Senate hearing in NSW on Friday, saying inflation combined with expensive property and rental markets are putting graduates in an increasingly difficult position.

“Students and graduates need immediate financial support to combat the cost of living crisis by suspending indexation of HELP debt repayments,” the union’s Senate bill says, reports The Australian.

Australian university graduates will be hit by the biggest spike in student loan debt in decades, according to the National Union of Students

HELP debt does not bear interest, but it is increased annually through indexation linked to the prime rate and inflation

“By increasing the student debt they take on, the government reduces their ability to borrow for housing and further locks them out of the market.”

Under the HELP scheme, students can access up to $109,206 to pay for college courses, more for specific courses like medicine or aviation, but they have to pay the money back once they start paying at least $46,361 a year earn.

To fund this, the government is borrowing at the Reserve’s Bank interest rate, which stands at 3.6 percent after a series of hikes.

While the interest rate is not passed directly to students, loans are indexed annually to maintain their real value based on a formula that accounts for cash interest and inflation.

The ATO is expected to announce this year’s indexation rate in May.

The indexation rate was 3.9 percent last year, but the National Tertiary Education Union expects it to rise to 6.15 percent this year.

According to the NUS, the average amount of outstanding debt per student will increase by US$1,500 from about US$25,000.

Friday’s hearing is being held by the Senate Education and Employment Committee, which is reviewing a Green party bill.

The bill would eliminate index rates on HELP debt and increase the minimum amount graduates on some courses earn before repayments occur.

About three million Aussies have more than $70 billion in outstanding HELP debt

Source: | This article originally belongs to Dailymail.co.uk