Fresh move in $3bn HECS debt plan: What we know about refunds and credits

The government's new bill has been introduced to parliament and promises to wipe out $3 billion in HELP debt for 3 million Australians. But how soon will the financial relief come?

Are you feeling the pinch from your student debt? The government's new bill could offer relief. Source: AAP / Julian Smith

Changes to student debt — which could save the average graduate $1,200 a year — have moved a step closer.

The bill was introduced to parliament on Thursday but has been referred to an inquiry, scheduled to report back on 30 September.

That means the legislation will not return to parliament until October at the earliest and will need to pass both houses before the changes take effect.

If the legislation becomes law, this is how it will affect Australians with a HELP debt.

What sparked the changes?

The changes follow the Department of Education's Australian Universities Accord report, released in February, which contained 47 recommendations to improve higher education in Australia.

The report recommended, among other things, that student debt indexation should not outpace wage growth.

Education Minister Jason Clare stated that the new legislation would help prevent steep hikes in student debts, like the increase last year.

"[The changes] will provide significant relief for people with a student debt while continuing to protect the integrity and the value of the student loan system, which have massively expanded tertiary access for more Australians," he said in parliament on Thursday.

Who will be affected?

Those who are set to benefit from the changes include students who have accessed HELP debt (such as HECS-HELP) loans and did not completely pay them off before 1 June 2023, when the highest rate of indexation in decades was applied.

Will I get a refund or credit — and how will they be applied?

HELP debts increase on 1 June each year. The indexation to be applied is calculated after the release of the March quarter Consumer Price Index (CPI). This is a key factor.

This year, HELP debts were indexed by 4.7 per cent (adding $1,272 to the average student debt), and by 7.1 per cent in 2023 (which added $1,758 to the average debt) — the steepest increase since 1990.

The legislation proposes changing indexation so that the main indicator used in the calculation is CPI or the Wage Price Index, whichever is lower.

The table below shows how much students with different loan balances could have wiped off their debt under the proposed changes.

Those with debts could receive thousands in credit.

The changes would also be backdated because indexation for this year and last has already been applied.

Student debt relief would be provided in the form of a credit.

That would automatically apply and reduce the amount owed on an active HELP debt after the legislation has passed.

For those who have paid off their HELP debt, the credit would instead be applied to Australian Taxation Office (ATO) or government debts.

But if you have neither of those and don't have a tax debt after filing your return, you would instead be paid a refund.

How long before I get my credit or refund?

The short answer is that changes are coming, but not just yet.

The old legislation is still in effect because the bill didn't pass before the indexation rate was applied and the new financial year began.

The ATO has also not committed to a time frame for tax refunds.

According to the ATO, tax returns should be lodged "as normal".

"As the legislation is not passed, the ATO cannot comment on the timing of any possible credits," the ATO told the ABC in late July.

"Depending on when the change occurs, any refunds resulting from the indexation reduction are likely to be sent separately to refunds from tax returns."