The Times Australia
The Times World News

.

What happens if you have a HELP debt and kids? The missed opportunity in Labor’s plan to fix student loans

  • Written by Mark Warburton, Honorary Senior Fellow, Centre for the Study of Higher Education, The University of Melbourne

The Albanese government has announced several significant changes to student loans[1] to start in mid-2025.

These include wiping 20% off debts, increasing the income threshold for compulsory repayments, and changing the amounts people have to repay.

As well as encouraging Australians to study, the changes aim to provide cost-of-living relief – or, as Prime Minister Anthony Albanese said on Monday[2]:

putting more dollars in the pockets of people who feel, justifiably, that they’re getting the rough end of the pineapple.

The changes are certainly an improvement. Unfortunately, they are not as good as they should be – particularly if you have a HELP debt and a family to support.

What is the point of HELP?

My analysis of the most recently released tax statistics indicates more than 70% of those required to make a HELP repayment in 2021–22 earned between A$60,000 and A$120,000. Only 20% earned more than $120,000 and less than 10% earned less than $60,000.

The HECS (now HELP) system was conceived in the 1980s as a way to generate revenue to help the government pay for an expansion of university places.

It doesn’t matter if people do not repay all of their loans. The primary purpose is to have students who have benefited, and can afford to contribute to the cost of their education, give something back.

While fairness has always been a key plank of HECS/HELP, there are some major problems with the system. And the changes announced over the weekend continue to ignore them.

University graduates in caps and gowns throw their gaps into the air.
The HECS/HELP system was designed so students would only repay loans if they had the capacity to do so. Enrico Della Pietra/ Shutterstock[3]

What about families?

Student loan arrangements have never taken account of other government payments and obligations such as social security, taxation rates, taxation rebates and Medicare levies.

As I have shown in this analysis[4], for some family types, HELP repayments combine to produce ridiculous effective tax rates.

Imagine the following scenarios for someone with a HELP debt, earning between $60,000 and $100,000 and who had a pay increase in this income range.

In 2022-23, if you were single with no kids, the average effective tax rate on the extra earnings was 51%.

If you were single with two kids aged four and seven, the average effective tax rate on the extra earnings was 77%. If those children were ten and 13, it was 73%.

The situation is similar in a couple family with two children where only one parent is able to work. The working parent has little incentive to increase their earned income and this won’t change much under the new proposals.

The reason people in these situations keep so little of their extra earnings is because as family incomes increase, they lose family tax benefits, they pay more tax and their Medicare levy increases.

There is not enough attention paid to how all these arrangements interact and how they affect people overall.

We need to know many families are paying HELP

The government’s plan to increase the HELP repayment threshold[5] to those with an annual income of $67,000 is a welcome improvement. The system was never intended to take money off people with virtually no capacity to pay.

The government’s plan to simplify the repayment arrangements is also a positive step. The current system has 18 different repayment rates applied to total income, which means people are repeatedly going backwards when they earn extra money. The new plan to only calculate repayments on dollars over the threshold (the marginal rate approach) stops this from happening.

But the system continues to disregard how people with HELP debts can be in different family circumstances.

In my work on HELP[6], I often get asked how many HELP debtors have dependent children. The answer is I do not know and neither does the government.

None of the data which the government releases provides any information on family circumstances, despite the fact around $4.6 billion was collected from 1.2 million individuals in 2021-22 (the most recent year we have for this data).

This is vital information to make good policy and fair decisions but we do not have it.

Prime Minister Anthony Albanese speaks to reporters outside.
Prime Minister Anthony Albanese’s proposed changes to HELP repayments will need parliamentary approval. Simon Bullard/AAP

Could these problems be fixed?

We could reduce many of the worst impacts here with a single marginal rate for calculating HELP repayments and thresholds which varied depending on the number of children and partner’s income.

The repayment rate and thresholds could be adjusted to deliver an acceptable repayment level for individuals and sufficient revenue for government to support university funding.

There is no point in pretending the current system is one in which people have an insignificant level of debt[7] that is repaid quickly after university.

Typical students today are finishing their degrees owing around $60,000[8] and many have debts much larger than this[9]. They will continue to make repayments well into their thirties when they have families.

It is time we had a system that truly recognised this.

References

  1. ^ several significant changes to student loans (theconversation.com)
  2. ^ said on Monday (www.pm.gov.au)
  3. ^ Enrico Della Pietra/ Shutterstock (www.shutterstock.com)
  4. ^ this analysis (www.education.gov.au)
  5. ^ increase the HELP repayment threshold (www.pm.gov.au)
  6. ^ work on HELP (theconversation.com)
  7. ^ insignificant level of debt (australiainstitute.org.au)
  8. ^ owing around $60,000 (www.abc.net.au)
  9. ^ many have debts much larger than this (www.smh.com.au)

Read more https://theconversation.com/what-happens-if-you-have-a-help-debt-and-kids-the-missed-opportunity-in-labors-plan-to-fix-student-loans-242758

Times Magazine

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Science Behind Reverse Osmosis and Why It Matters

What is reverse osmosis? Reverse osmosis (RO) is a water purification process that removes contaminants by forcing water through a semi-permeable membrane. This membrane allows only water molecules to pass through while blocking impurities such as...

Foodbank Queensland celebrates local hero for National Volunteer Week

Stephen Carey is a bit bananas.   He splits his time between his insurance broker business, caring for his young family, and volunteering for Foodbank Queensland one day a week. He’s even run the Bridge to Brisbane in a banana suit to raise mon...

Senior of the Year Nominations Open

The Allan Labor Government is encouraging all Victorians to recognise the valuable contributions of older members of our community by nominating them for the 2025 Victorian Senior of the Year Awards.  Minister for Ageing Ingrid Stitt today annou...

The Times Features

How to Tell If Your Eyes Are Working Harder Than They Should Be

Image by freepik Most of us take our vision for granted—until it starts to let us down. Whether it's squinting at your phone, rubbing your eyes at the end of the day, or feeling ...

Ways to Attract Tenants in a Competitive Rental Market

In the kind of rental market we’ve got now, standing out is half the battle. The other half? Actually getting someone to sign that lease. With interest rates doing backflips and ...

Top Tips for Finding the Ideal Block to Build Your Home

There’s something deeply personal and exciting about building your own home. You’re not just choosing paint colours or furniture, you’re creating a space that reflects your lifes...

The Home Buying Process Explained Step by Step

Buying a home is a thrilling milestone, but it can also feel like navigating a maze without a map. With paperwork, finances, and decisions at every turn, understanding the home-b...

Thinking of Selling Your Home? Here’s What You Need to Know

Selling a home is more than just putting up a “For Sale” sign. It’s a strategic process that involves preparation, pricing, and negotiation - all aimed at getting the best value ...

Smart Ways to Earn Passive Income from Real Estate

Imagine making money without doing much work. You get paid even while you sleep, travel, or do fun things. This is called passive income. Indeed, real estate has great ways to do...