HECS/HELP debt will rise by 7.1% on 1 June this year, the highest indexation rate seen in 32 years. 

While the ATO is yet to formally release the indexation figures for 2023, quarterly inflation data for March was 7% insinuating a rise in uni debts was inevitable. 

Australia’s overall student debt will increase from $74 billion to just under $80 billion. 

Greens Senator and Spokesperson Mehreen Faruqi said linking student debt to inflation was making life harder for young Aussies.

“Student debt is rising faster than it can be paid off,” Ms Faruqi said.

Indexation on student debt has spiked over the past three years, starting at 0.6% in 2021 and 3.9% in 2022. 

According to a report by Futurity Investment Group, the average HECS/HELP balance is $22,636.

If you take last year’s indexation rate of 3.9% on an average debt of $22,636, approximately $880 was added on top of what was already owed.

This year, a person with an average-sized debt would expect to see $1,600 added to their loan if it was indexed at 7.1%.

Those with a $30,000 debt could see $2,100 added to their loan, while Aussies with a $40,000 balance could face upwards of $2,800 added.

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Getting on top of original amount owed becoming harder

If inflation remains stubbornly high, some Aussies may find it tough to clear their debt.

For example, if someone earns $70,000 and has a HECS debt of $22,636, each year, they’d need to pay off 3.5% of their income, or $2,450.

However, indexation of 7.1% would add $1,600. So, they are only reducing their debt by $850 per year.

It's also highly possible that someone won't pay off any of the original principal if they have a higher debt and a lower income.

Read More: Pay off HECS/HELP debt before indexation?

Image by Joshua Hoehne via Unsplash