You may have heard a bit of commotion around how our HECS-HELP debts will be growing come June 1 this year.

And I know what you’re thinking. ‘But, my student loan is interest free! How can that happen?!’

I hear ya, I hear ya. Let’s break it down.

What is the HECS-HELP scheme?

The Higher Education Contribution Scheme (HECS) became the Higher Education Loan Program (HELP) scheme in 2005. So, now we know it as the HECS-HELP scheme.

When you attend uni or an approved higher education provider, you’re generally given the option to use a HECS-HELP loan to pay for your studies. This means you don’t pay for your fees upfront. Instead, the government foots the bill, and you repay it later.

It’s often called the-best-loan-you’ll-ever-get, because it’s interest-free and can help you achieve some pretty nifty things - like graduating uni! 

But hold up... While it’s true that there is no interest charged on HELP debts, indexation will still be added to your debt.

What is loan indexation?

Your HECS-HELP debt is indexed to inflation.

That means it generally rises as the consumer price index (CPI) rises. This indexation is added to your debt on June 1 each year. The idea is that your debt maintains its ‘real’ value in today’s world.

What are HECS-HELP loans indexed at in 2022?

Normally, HECS-HELP loans are indexed just below 2% each year. If you have a HECS-HELP debt of $10,000, the 2% indexation would mean this loan would now be $10,200.

But this year, the HECS-HELP debt will be indexed to a huge 3.9%. And since the average HECS-HELP debt was $23,686 last financial year, the average HECS-HELP debt will increase by $920 on June 1! Yikes.

Why the big jump? Well, we can thank inflation, which surged to 5.1% across the March quarter.