Are you feeling the weight of your student debt? Is your debt increasing faster than you can pay it back? You aren’t alone. However, changes are on the way. Recently, the Federal Government unveiled changes to how indexation is calculated on HECS and HELP loans. It’s excellent news for the thousands of students in Australia who are concerned about their financial security.
So, how will this impact workers and the broader employment market?
With thanks to the ABC and The Guardian, we explore how these changes will work and the impact this will have on the employment market.
What are the changes?
This week’s federal budget will include long-awaited changes to HECS and HELP student debts. Until now, the indexation of these debts has been tied to the consumer price index. However, this has become increasingly problematic. This is because the consumer price index has been at record highs, mainly due to persistent inflation. As a result, many students have found their debts increasing faster than they can pay them off.
Under the government’s changes, indexation will be calculated based on either the consumer price index or the wage price index, whichever is lower. In further good news for students, last year’s increase of 7.1% will be backdated down to 3.2%, which is last year’s average wage price index.
What will these changes mean for employment?
For many students, these changes may mean they can study at university and follow their desired career paths. Currently, education costs are a significant factor for many when deciding which career to pursue.
In addition, it is hoped reducing student debts will encourage skilled workers to remain in Australia. Those working overseas do not have to pay their HECS debts until they return to Australia. Previous reports suggested some students wanted to leave the country to escape their HECS debts.
The changes could also help address many critical skills shortages, increasing the takeup of many vital industries. Depending on your previous background, entering some industries, such as teaching or social work, requires a master’s degree. As a result, graduates of these degrees will incur a higher-than-average HECS debt. Therefore, these changes could help incentivise people to work in these vital industries.
Many hope the changes will make working in the public sector a more attractive employment option. Zoe, an arts-law graduate, has worked in the public service for five years and now earns a relatively high salary. However, she has still been unable to pay down her HECS debt.
In an interview with The Guardian last year, before the changes were announced, Zoe admitted she was concerned for her financial future as a public sector employee.
“It is incredibly disheartening to realise that the debt will probably not be paid for another 20 years if I choose to stay in the public service,” she said.
However, not everyone is sold on the significance of the changes. Some believe the changes will not do much to improve students’ lives. This is because there have only been two years where the Consumer Price Index was higher than the Wage Price Index in 2022 and 2023. The Federal Greens are calling for indexation to be removed altogether.
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