At Young Professionals (YP) Gold Coast, we’re dedicated to empowering young professionals with the insights they need to navigate complex financial decisions, including those related to higher education. Recently, the YP Gold Coast Committee sat down with two of our Platinum Partners, Southern Cross University and Community Bank Paradise Point, Bendigo Bank to explore the realities of the Higher Education Loan Program (HELP) debt and its implications for young Australians in today’s economic landscape.
HELP, formerly known as HECS, has long been celebrated for democratising higher education in Australia, allowing students to pursue degrees without the immediate financial burden of upfront fees. Without HELP, there are many professionals in Australia that may never have had the opportunity to obtain a degree and excel in their career in their chosen profession.
Yet, with the average HELP debt reaching $26,494, it’s essential to consider how this debt impacts young Australians’ ability to achieve critical financial milestones, like buying a first home or investing in their future.
The Growing Debt Dilemma
Since 2006, the average HELP debt has climbed from $12,500 to around $31,000. For young professionals with aspirations of homeownership, this figure isn’t just a number—it represents a potential roadblock to financial stability. According to insights from Community Bank Paradise Point, Bendigo Bank, a HELP debt could reduce a person’s borrowing capacity by as much as $48,000 for a home loan, assuming an income of $90,000 and no other liabilities. This is further backed by data from Finspo, which states that a person with a HELP debt can expect their maximum borrowing power to be reduced by around 10x the value of their annual HELP repayments.
This reduced borrowing capacity underscores the importance of evaluating the long-term financial impact of HELP debt. Although degrees have traditionally been seen as investments that open doors to well-paying jobs, today’s job market presents a different reality. Banks consider HELP debt a part of an individual’s liabilities, which directly influences one’s ability to secure financing for a home—a fundamental step in building personal wealth and stability, particularly from a young age.
Inflation, Indexation, and HELP Debt
One critical factor influencing HELP debt is the process of indexation, which adjusts the balance annually based on inflation. Indexation ensures that the debt retains its real value over time, but during periods of high inflation, it can lead to significant increases in HELP debt. This is particularly relevant given Australia’s recent inflationary trends since the COVID-19 pandemic.
Below is a table illustrating the correlation between inflation rates, indexation rates, and the effect on HELP debt over recent years:
| Year | Inflation Rate (%) | HELP Indexation Rate (%) |
| 2018 | 1.9 | 1.8 |
| 2019 | 1.8 | 1.8 |
| 2020 | 0.9 | 0.6 |
| 2021 | 3.5 | 3.5 |
| 2022 | 6.1 | 3.9 |
| 2023 | 7.8 | 7.1 |
| 2024 (est.) | 5.5 | 5.2 |
As inflation increases, so too does the indexation rate applied to HELP debt, which can sometimes result in the total balance of the HELP debt increasing over time, despite repayments being made.
High inflation has a significant impact on the purchasing power of income earned through employment, meaning that young professionals are increasingly finding their earnings do not stretch as far. Despite this, the payment income thresholds for the 2022-23 income year were $48,361.00 and phased to a 10% repayment rate at $141,848 and increased for the 2023-24 income year to be $51,550 and phased to a 10% repayment rate at $151,201 (a 6.5% increase). Even if you work hard to earn more, you face having to repay more of your income towards your HELP Debt.
It is essential for young professionals to be aware of the larger financial picture and how it may impact their repayment journey.
A Welcome Relief: Government Freeze on HELP Indexation
In response to growing concerns around rising HELP debt, the Australian government recently introduced an initiative to freeze HELP indexation temporarily. This measure was backdated to 1 June 2023 to cover these high inflation years, providing much-needed relief to young Australians. For many, this means their HELP balances will be protected from further inflation-driven increases, helping them maintain a more manageable debt load and offering more financial predictability as they plan for the future. For a student with an average HELP debt of $26,000, this will reduce their student debt by approximately $1,200. To accurately estimate the credit that this indexation freeze will have on an individual’s HELP debt, use the federal government’s HELP Indexation Credit Estimator found here.
This decision represents a significant step forward in supporting young professionals and students, offering immediate relief and addressing some of the financial pressures associated with HELP debt. The freeze on indexation allows those with HELP loans to focus on other critical financial goals, like saving for a home deposit or pursuing further education, without the added concern of compounding debt due to inflation.
The Evolution of Education: From Traditional to Hybrid Models
With the shift toward online and hybrid learning, universities are responding to a changing world by creating new, flexible learning models. Southern Cross University has been a leader in this area, pioneering remote and online education well before the pandemic made it a necessity. The university’s forward-thinking approach has not only provided students with greater accessibility but has also set a benchmark for high-quality online education in Australia.
Student feedback from Southern Cross University highlights that hybrid learning models offer significant benefits, from flexibility to increased engagement. Today, universities are blending online and in-person elements to create a rich, adaptive educational experience that suits the evolving needs of students.
Degrees vs. Industry Certifications: What’s the Best Investment?
As the financial cost of a degree rises, many young professionals are questioning whether a traditional degree provides the best return on investment. In recent years, industry-specific certifications and shorter, targeted courses have gained traction, offering quicker, more affordable paths to career advancement.
Southern Cross University and other institutions have responded by incorporating industry-recognised certifications within degree programs. This approach bridges academic knowledge with practical, career-focused skills, helping students graduate with both a degree and a credential that is highly valued by employers. These evolving pathways demonstrate how universities are adapting to meet the demands of a rapidly changing job market while enhancing the value of a traditional degree.
Addressing the Cost Barrier
As the costs of education and HELP debt rise, ensuring equitable access to higher education becomes increasingly important. Initiatives such as targeted scholarships and government grants aim to ease this financial burden, especially for underrepresented groups.
Additionally, collaboration between TAFEs and universities is making higher education more flexible and affordable, creating pathways that enable students to pursue higher education without excessive financial strain.
The Australian Universities Accord also seeks to reform higher education by making it more accessible and equitable, reflecting the need for a balanced approach to education funding that benefits students and society as a whole.
Finding the Right Balance: Traditional Education and Practical Experience
In an era where industries are rapidly evolving and AI is reshaping the workforce, universities are challenged to balance traditional education with practical, industry-focused experiences. Many young professionals are opting for a blend of university education and certifications to maximise the value of their investment. For some, this combination provides the best of both worlds: the theoretical knowledge gained from a degree, paired with the hands-on skills offered by certifications and work-integrated learning.
Conclusion: HELP Debt and the Path Forward
While HELP has been instrumental in providing accessible education, rising debt levels and a competitive job market necessitate a thoughtful reassessment of its impact. The government’s recent freeze on HELP indexation is a welcome step in addressing the financial burden on young Australians, offering relief and greater financial stability in the face of rising inflation. A further initiative which may be viable could be increasing the minimum repayment income threshold significantly, to further ease the financial burden of a HELP debt.
As the landscape of higher education continues to evolve, it’s crucial for young Australians to weigh the financial implications of HELP debt and explore diverse educational pathways.
With universities now embracing flexible learning models and integrating certifications into degree programs, students have more options than ever to pursue an education that aligns with their career goals and financial well-being. Local universities such as Southern Cross University are providing these flexible tertiary education models, ensuring a diverse range of career opportunities and making the investment in a university education worthwhile.
At YP Gold Coast, we advocate for young professionals to consider all aspects of their educational investments carefully and we strive to provide invaluable information, where possible. By staying informed and exploring innovative pathways, we believe young Australians can make empowered choices that open doors to a successful, financially stable future.
Sources:
Community Bank Paradise Point, Bendigo Bank
https://www.finspo.com.au/learn/how-hecs-affects-borrowing-power
https://www.pm.gov.au/media/why-3-billion-hecs-wipe-will-make-real-difference
https://www.education.gov.au/helpestimator
Notification of the repayment incomes and the repayment rates for the Higher Education Loan Program for the 2022-2023 income year
Notification of the repayment incomes and the repayment rates for the Higher Education Loan Program for the 2023-2024 income year
