The return of inflation has led to questions about what this means for students, graduates and higher education institutions. This post lists some of the implications.
Indexation of HELP debt
HELP debt is indexed each 1 June. It is based on a two year period of CPI data ending in the March quarter of 2022 (I am not sure why it is two years). Because inflation March 2020 to March 2021 was lower than inflation March 2021 to March 2022 indexation for 2022 was 3.9 per cent, rather than the 5.1 per cent it would have been on a one year CPI cycle. The downside of this reprieve is that after inflation comes down again indexation will still exceed the recent average.
I said at last week’s Universities Australia conference that increased indexation will affect the politics of HELP debt. The big increase in the number of HELP debtors and total HELP debt over the last 15 years occurred at a time of mostly low inflation. Annual indexation rarely attracted much comment. This year there was much more media and social media coverage.
CPI is well above bank interest rates, giving people who can afford to repay early an incentive to do so. Indeed, low bank interest rates may help explain why voluntary HELP repayments have grown in recent years.Read More »