The Australian Government has made an announcement ahead of this month’s budget to change how indexation is applied to tertiary education loans, a change that will need to be approved by Parliament. 

Let’s take a look at what has been proposed and what it all means. 

Indexation limit 

Students take on a debt through a loan scheme to help pay for their university education. 

Higher Education Loan Program (HELP) debts are compulsorily repaid once you start earning income, beyond a certain threshold. 

Each year the debt is indexed at a rate linked to Consumer Price Index (CPI). 

The change announced by the government is to try to limit those increases, with “the HELP indexation rate to be the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI)”. 

For 2023, the WPI increase is 3.2%, which is much lower than the CPI increase of 7.1%. So, this lower WPI rate will be used to calculate the HELP debt increase.

This change is backdated to June 1 2023 and covers all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed on June 1 last year.

Future savings  

The government is projecting this change will eventually save students $3 billion in total. 

At an individual level, backdating the change to June 2023 will save someone with a $50,000 debt approximately $2,245 on their indexation over the past year. 

This backdated amount will be credited to people who have a student loan. 

The government has made an online calculator available for people to work out how the proposal will affect their loan. 

And for more information, the ABC has prepared this explainer on the proposal. 

More details about proposed changes to taxation are expected when the government hands down its budget on May 14.