Government announces changes to student debt indexation

Education Minister Jason Clare has announced a $3 billion change to student debt indexation.

Responding to the Australian Universities Accord, the government will introduce legislation to cap the HELP indexation rate to be the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI) with effect from 1 June 2023.

This will be backdated to all HELP and VET loans, Australian Apprenticeship Support Loan and other student support loan accounts that existed in June last year.

Clare said this would lower the student debt obligations of nearly 3 million Australians.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI,” he said.

“We are doing this, and going further. We will backdate this reform to last year. This will wipe out what happened last year and make sure it never happens again.”

Student loan indexation has been historically pegged to CPI. In a low inflation environment, this meant increases in student debt remained relatively low.

Last year’s CPI spike saw an historically high indexation of 7.1%, erasing the progress many university graduates had made paying off their student loans.

The 2023 indexation rate based on WPI would only have been 3.2 per cent.

The Universities Accord identified the cost of university as a barrier to entry for many disadvantaged Australians. To combat this, it recommended simplifying the way student debt is indexed, higher and more accessible student payments, and reducing the financial burden of placement in courses that demand it.

Along with changes to student debt indexation, the government has announced plans to introduce a “Commonwealth Prac Payment” for people training for high-demand professions like teaching, nursing and midwifery.

This will provide around 68,000 eligible higher education students and over 5,000 VET students each year with $319.50 per week during their clinical and professional placement periods.

Benchmarked to the single Austudy per week rate, this payment will provide cost-of-living relief for many students. It will be means-tested and available from July 1 2025 and will be in addition to any income support a student may also receive.

With the majority of students and workers in these critical care fields being women, the payment also helps implement the government’s gender equality strategy. The payment will also help support the pipeline of social workers available to support those affected by family, domestic and sexual violence.

Minister for Skills and Training Brendan O’Connor said this would help tackle “placement poverty” that was preventing poorer people from achieving higher qualifications.

VET Student Loans and Apprenticeship Support Loans support many Australians to get the skills they need for secure and rewarding careers, and these changes make sure that help is provided on a fairer basis,” he said.

“This prac payment is in addition to the government’s investment in Fee-Free TAFE which is supporting thousands to gain Division 2 nursing qualifications and helping to address skills shortages in aged and health care.

“This is an additional payment to support nursing TAFE students who have extra costs such as uniforms, travel, temporary accommodation or child care, during mandatory clinical placements.”