- Data released by the ATO has revealed one Australian has a higher education debt of over $737, 000.
- Experts say the debt was likely accrued before 2020, when new limits came into effect.
- The loan limit for most students today is $113, 000.
If you thought your student loan was expensive, think again.
The Australian Taxation Office has released data revealing the largest higher education loan balances in the country, with one mystery student accruing a debt of $737,070.
The second highest was $495,990, with the top 10 all holding balances of over $300,000.
While the identities of the scholars haven’t been revealed, questions have also been raised over caps on the Higher Education Loan Program (HELP), and how it’s possible to accrue a student debt of this size.
Here’s what you need to know.
What is HECS-HELP debt and how does it work?
The Higher Education Contribution Scheme (HECS) was established in 1989, with loans available at all public universities and some private education providers to help students to pay course fees.
HECS was absorbed into HELP after legislation was introduced in 2003, and there were initially no limits on how much student debt could be accrued by individuals.
In 2020, a loan limit policy was introduced, placing a cap on the amount students can borrow.
In 2023, the HELP loan limit is $113,028 for most students.
Those studying medicine, dentistry, and eligible aviation and veterinary science courses have a higher limit of $162,336.
The ATO has revealed one person in Australia has accumulated a student debt of over $737, 000. Source: SBS News
How is it possible to accumulate $737,000 of student debt?
Andrew Norton, a professor of higher education at the Australian National University, says the large debts were almost certainly accrued through students enrolling in multiple courses before the limits were introduced.
“A normal undergraduate at a public university could – in theory – have started in 1989 and stayed enrolled that whole time, never made any repayments, and had their debt indexed every year for several decades,” he said.
“Something like that would accumulate a lot of debt over an extended period of time.”
In 2023, people need to make loan repayments once they reach an earning threshold of $48,361.
No payments are required until that time.
Professor Norton says it wouldn’t be possible to accrue a debt of $737,000 under 2023 loan caps.
However, he says it is still possible to build up a debt higher than the $113,000 limit.
“There are other loan schemes, such as the student start-up loan for income support, SA-HELP for student amenities fees, OS-HELP for overseas study; they’re not included in the cap,” he said.
“And indexation is not included in the cap either, so even though you’ve only borrowed $113,000 for your actual tuition costs, you could have borrowed more, and indexation over time could still lead to substantial debts if you don’t make repayments.”
Why is my HECS-HELP debt increasing?
If your loan debt seems to be increasing each year, you’re not imagining it.
HECS-HELP debts are interest-free, but the debt is indexed each year in line with inflation; meaning that as the Consumer Price Index (CPI) increases, so does your debt.
Australians have incurred a total student debt of over $100 billion, according to the Australian Taxation Office.
Indexation is applied on 1 June each year, with the rate reaching a high of 3.9 per cent in 2022.
This year, it’s forecast to rise again.
“It will probably be around 7 per cent this year,” Professor Norton said.
“So if you owed $100,000 on 1 June, your debt would go up to $107,000 if the indexation is 7 per cent.”
The 2023 indexation rate will be calculated when the CPI figures for the March quarter are released in late April.