Key detail as student debt set to soar
Millions of Aussies with outstanding student debt will have their deficits deepened on Sunday, with a promised slashing of student debt still about two months away.
One of Labor's big ticket pre-election promises was to slash HECS, VET and apprenticeship loans by 20 per cent as soon as Anthony Albanese's government was re-elected.
People's debt will jump on Sunday when the annual increase kicks in, as laws to make the 20 per cent cut won't be introduced to parliament until MPs return to Canberra in late July.
'It will be the first bill that we introduce into the parliament when parliament sits for the first time in the last week of July,' Education Minister Jason Clare said this week.
Student debts will be jacked up 3.2 per cent on Sunday, in line with the consumer price index.
But once legislation for the 20 per cent cut is passed, debts will be slashed retrospectively, and the indexation applied will be adjusted to reflect the lower balance.
This means the indexation increase will only apply to the amount owed before the June 1 increase, minus 20 per cent.
Slashing student debts by 20 per cent will cost the federal budget $700m during the next four years, and $16bn over the coming decades.
The average student debt in Australia is about $28,000; last term, the federal government tweaked the annual increases after debts skyrocketed during the back-end of the pandemic with massive inflation.
'I think everyone listening will know somebody in this situation and perhaps will know that HECS debts are bigger today than they were when I went to uni, when many of us went to university – that by cutting this debt by 20 per cent, it's going to help a lot of people get a good start in life, make it easier to get out there and buy their first home,' Mr Clare said on ABC radio this week.
Higher education was free in Australia from 1974 until 1989. Initially, all degrees then cost $1800, but in 1996 the federal government brought in three-tiered rates.
The current Education Minister, Mr Clare, finished with a bachelor of arts and a law degree from UNSW in 1998.
The laws required to slash student debts by 20 per cent will have other functions too.
'It will change the amount of money that you have to earn before you start paying your debt back,' Mr Clare said.
The threshold to start paying off the debt will rise from $54,000 to $67,000. For someone being paid $70,000, repayments should decrease $1300-per-year.
'It means more money in your pocket,' Mr Clare said.
Laws need to change so the tax office can wipe 20 per cent off the debts.
Labor will have to rely on the Greens to pass the laws through the senate. During the election campaign, the Greens said they would wipe all student debt if elected.
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