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While governments have tied our loan increases to inflation for decades, they haven’t always been as eager to raise our repayment threshold – the income at which we have to start repaying our HELP – by the same percentage.
Over the past three years, the threshold has increased in line with inflation, from $46,620 in 2020 to $48,361 in 2022. But look a little further and you’ll see that across 2018 and 2019, the repayment threshold was slashed from $55,874 to $45,880 – the largest percentage drop in the threshold in more than 20 years. We’re paying off bigger loans, starting earlier.
Millie Muroi, her dad Michihito and mum Riyoko, at her University of Western Australia graduation in 2021.Credit: Millie Muroi
Fortunately, HELP doesn’t affect our credit scores, but it does reduce borrowing power. We’re not only battling against exorbitant house prices and lower wages, but also banks baulking at the idea of lending to us – because of a debt we’re told we shouldn’t worry about.
Since HELP repayments are deducted from our pay cheque, they reduce our income and therefore how much banks are willing to lend us for home loans.
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There’s an argument to be made that we knew what we were getting into when we took on HELP – but a 7.1 per cent indexation was not in most – if any – of our calculations.
The Greens’ recent proposal to freeze indexation on student loans may have been rebuffed, but it shouldn’t be written off. In the meantime, experts such as ANU professor Andrew Norton have suggested indexing the loans to the lesser of inflation or the 10-year bond rate. The latter, Norton says, indicates how much it costs the government to have HELP debt sitting on its books. There’s also a case to index the loan to wage growth. It’s worth considering.
The most common response to those complaining about HELP is that it’s probably the only zero-interest loan we’ll get in our life. Don’t get us wrong – we’re grateful we don’t have to pay tens of thousands of dollars upfront.
There’s a fine line between making life a little less tough for taxpayers and being fiscally irresponsible, but education is a key driver of economic growth.
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Some of us may have made the investment at an especially unfortunate time, but it will pay off – it just helps to get a breather while we find our feet.
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