It looks like inflation really isn’t done with us yet. 

The ATO has just announced that this year, HECS-HELP debt will be indexed to 7.1% from June 1 this year.

As a refresher, the HECS-HELP scheme is where your university or higher education fees are paid for by the government up-front, and then the government gives you an interest-free loan to repay your student fees later.

Yes, it’s technically interest free. Yes, you get to access higher education. And yes, you don’t need to start repaying until you reach a certain income level  (in the 2022-23 financial year, it’s $48,361).

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Check out part two of this series, “Should I pay off my HECS-HELP debt early?”.

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Buuuuuuut there’s a catch.

While there’s no interest charged on HECS-HELP debts, they are indexed, meaning each year your student debt is adjusted in line with inflation.

The idea is that your debt maintains it’s ‘real’ value in today’s world.

Now, for the past 10 years, this hasn’t been a huge issue because indexation has remained at around 2%. This “indexation” occurs on June 1st each year.

So, if you have a HECS-HELP debt of $10,000, on June 1st of each year, the indexation would kick in. In the past, this was around 2% so it would take your loan up to around $10,200.

But this year, inflation has jumped by 7.8%, which is the highest year-end inflation since 1990! As a result, the HECS-HELP loans will be indexed at 7.1%. 

‍What does that mean for my HECS-HELP loan?

Australians with an average HECS-HELP debt of $22,636 are expected to see their balance increase by at least $1,607 when the indexation hits on 1st June.

Usually, experts advise you to delay paying down your HECS-HELP debt for as long as possible and prioritise other debts ahead of it - but with the new indexation announcement, some people might need to reconsider their financial priorities. 

‍So to find out what Flux reckons you should think about in paying down your HECS-HELP debt early, check out part two of this series, “Should I pay off my HECS-HELP debt early?”.