Representation. A student.
The credits and refunds may take a few weeks to be processed.

New legislation that introduced changes to student debt rules became a law on Tuesday, allowing some borrowers to receive loan credits and others to get refunds. The new law will allow hundreds of dollars to be wiped from student debts and will also change how the loans are indexed every year.

The changes

Higher Education Loan Program (HELP) debts, a key component of the Higher Education Contribution Scheme (HECS), are interest-free but are indexed annually.

Previously, these debts were indexed according to the inflation rate, measured by the Consumer Price Index (CPI) published by the Australian Bureau of Statistics. However, indexation will now follow the CPI or the Wage Price Index, whichever is lower.

These changes will be applied retrospectively to the past two financial years, affecting indexation for both 2023 and 2024. As a result, individuals with outstanding student debts may receive a credit, while those who have already paid off their loans since 2023 could be eligible for a refund.

The new HECS indexation rates

The new HECS indexation rates for 2023-2024 are lower than the previous rates. In 2023-2024, the old rate was 4.7%, while the new rate is 4.0%, a decrease of 0.7%. For 2022-2023, the old rate was 7.1%, while the new rate is 3.2%, which is a drop of 4.1%.

Credit or refund

Whether a borrower receives a HECS credit or refund will depend on their situation. People who have completely paid off their HECS before indexation was applied on June 1, 2023, will not receive a credit or refund.

Borrowers who had their HECS debt indexed on June 1, 2023, or June 1, 2024, will receive a credit.

If they still have an ongoing HECS debt, the credit will be applied to reduce the amount owed.

If the debt is already paid off, the credit will be issued as a refund, which will be processed by the Australian Taxation Office (ATO). If the borrower owes the ATO, the credit will be applied to reduce the outstanding amount. If there is no ATO debt, a refund will be issued.

Processing time

The credits and refunds may take a few weeks to be processed.

"The ATO will automatically apply these changes to everyone with a student loan," Education Minister Jason Clare said on Tuesday night. "This work will happen as soon as possible. You will not need to wait until you lodge your next tax return to receive the indexation credit."

Payments will be deposited into the bank accounts the ATO has on file.

To check the HECS balance, people will have to log into their MyGov accounts linked to the ATO.