Daily Archives: April 29, 2015

Corrected post: Most HELP debtors still owe less than $20,000, but big debts are increasing

The ATO personal income statistics provide information on how much debt students and former students are holding. Although debt levels are increasing, the vast majority of HELP debtors (71 per cent in 2012-13) still owe $20,000 or less.

The modal amount of debt is below $10,000, with more than 40 per cent in this category in all years. However, this is a poor guide to what the typical student will end up borrowing, as it includes people who are early in the borrowing phase and towards the end of their repayment phase (plus probably quite a few people who did not borrow much in the times when HECS was much cheaper, but have not repaid).

HELP debt levels

The share of HELP debtors owing more than $40,000 has increased from 3.5 per cent to 5.6 per cent between 2010-11 and 2012-13, or just over 100,000 people in 2012-13.

Fewer people are repaying their HELP debt

A few months ago I argued that flat graduate incomes and an initial threshold that was indexed to average weekly earnings was going to mean fewer graduates making a repayment. The 2012-13 taxation statistics that came out today shows that this is already a problem. The total number of people who made a HELP repayment that year dropped by over 2,000 compared to 2011-12, while the total number of debtors increased by more than 142,000.

Help debtors and repayments

The surge in enrolments since 2009 means that it is inevitable that a lower percentage of debtors will make a repayment, since it takes time for people to finish their courses and enter the workforce. But this is only the second time since HECS/HELP started in 1989 that the absolute number of people making a repayment went down, other than due to a deliberate policy shift (increasing the threshold for 2004-05). Total repayments did go up by $24 million, or about 1.6%.

The falling number of debtors making a repayment highlights again the need for a lower threshold and measures to reduce the manipulation of HELP repayment income.