Speaker 1: Already and this is the Daily This is the Daily OS. Oh,
Speaker 1: now it makes sense. Good morning and welcome to the
Speaker 1: Daily OS. It's Sunday, the sixteenth or February.
Speaker 2: I'm Billy, I'm Sarah.
Speaker 1: It's not normal that we're always here on a Sunday.
Speaker 2: I know what a pleasure.
Speaker 1: It's a pleasure and a privilege to be in your
Speaker 1: ears on this Sunday. Now, last year the government legislated
Speaker 1: a change to help and other student loans, and that
Speaker 1: change is now coming into effect. So with that in mind,
Speaker 1: we thought it was the perfect time for a classic
Speaker 1: TDA explainer breaking down everything you need to know about
Speaker 1: your student loan and more importantly, how this change will
Speaker 1: affect you. So Zara recently on our Instagram stories on
Speaker 1: the Daily OS, we asked what the audience wanted to
Speaker 1: know about the recent change true student loans, and we
Speaker 1: were inundated with questions. So today, on this Sunday, we
Speaker 1: are giving you all of the answers.
Speaker 2: What better day of the week a Sunday to talk
Speaker 2: about this?
Speaker 1: And just a quick note before we start that this
Speaker 1: podcast is produced with financial support from the Australian Government,
Speaker 1: but as always, this content has been produced by us
Speaker 1: using our normal editorial processes.
Speaker 2: With that out of the way, Billy, let's get straight
Speaker 2: into student loans. So let's just set it up. I
Speaker 2: guess when someone begins a university course, they can either
Speaker 2: pay up front or they can access a loan from
Speaker 2: the government. So since most degrees are tens of thousands
Speaker 2: of dollars, then you get into double degree territory, and
Speaker 2: you know you're looking a lot here. Most people do
Speaker 2: tend to opt for a student loan. Now, I've always
Speaker 2: known student loans to be referred to as heck. But
Speaker 2: you did just open this podcast by talking about help,
Speaker 2: which was a tad confusing to me. Which one is
Speaker 2: right or what's the difference? I guess if they are different.
Speaker 1: Okay, so both are right, and it just depends what
Speaker 1: you're talking about. Think of help as kind of an
Speaker 1: umbrella term that covers all government higher education loans, and
Speaker 1: then HEX is just one of those loans that you
Speaker 1: can get under the umbrella of help, And HEX is
Speaker 1: the loan that most undergrad students at universities do use.
Speaker 1: But for simplicity's sake, we'll be referring to it as help.
Speaker 1: So we're going to be covering all student loans.
Speaker 2: Okay, that makes sense to me. So help umbrella. He's
Speaker 2: a specific form of that.
Speaker 1: Help, which is the one that most of us would
Speaker 1: have used.
Speaker 2: Yeah, okay, cool. And just before we go any further,
Speaker 2: I do want to ask you a question, because I
Speaker 2: know it's on everyone, every young person's mind. It's what
Speaker 2: their parents always tell them. Is it true that university
Speaker 2: was once free?
Speaker 1: It was so for our parents' generation, Like you said,
Speaker 1: university was free. So that was from nineteen seventy four
Speaker 1: to nineteen eighty nine.
Speaker 2: That's actually shorter than I thought it was.
Speaker 1: Yeah, how long is that you're going to make me
Speaker 1: do maths? Like fifteen years? Yeah, fifteen years.
Speaker 2: I kind of thought it was like a generational Yeah.
Speaker 1: No, just fifteen years that students didn't need to pay
Speaker 1: for their degrees. But then this system of student loans
Speaker 1: was rolled out in nineteen eighty nine. And notably, there
Speaker 1: are actually a lot more people going to university now
Speaker 1: than there was when going to UNI was free. So,
Speaker 1: in nineteen eighty nine, only eight percent of the working
Speaker 1: age population had a university degree, and now it's thirty
Speaker 1: two percent. Interesting, so there has been quite a considerable
Speaker 1: increase there. And now obviously going to UNI now isn't free,
Speaker 1: but the government shocked to all. But the government does
Speaker 1: help by subsidizing some of the cost and then letting
Speaker 1: you take out a help loan for the rest. And
Speaker 1: now another thing to note is that you only need
Speaker 1: to start repaying that loan once your income reaches a
Speaker 1: certain point, and how much you repay each year is
Speaker 1: dependent on your income.
Speaker 2: And that point about repayments being dependent on your income
Speaker 2: is a really important one that I don't know that
Speaker 2: you know I necessarily told enough about.
Speaker 1: No, there's no university course where you get taught about
Speaker 1: this adulting. So at the moment, the minimum compulsory repayment threshold,
Speaker 1: so that is the income that once you start earning
Speaker 1: you have to start repaying your loan. That number is
Speaker 1: fifty four, four hundred and thirty five. So if your
Speaker 1: income is above that you're paying that means that you're
Speaker 1: starting to repay. And then once you do start repaying it,
Speaker 1: how much you repay, like I said before, is dependent
Speaker 1: on how much you are earning. So, just to give
Speaker 1: you an example, someone earning fifty five thousand dollars is
Speaker 1: only paying back one percent of their income, whereas someone
Speaker 1: earning you know, let's say one hundred and fifty thousand dollars,
Speaker 1: is paying nine percent of their income towards their compulsory repayments. Also,
Speaker 1: just another thing to note is that it gets withheld
Speaker 1: from your pay automatically by your employer. So that's something
Speaker 1: that you'll see in your pay slip each month or
Speaker 1: however often you get paid, and that is on behalf
Speaker 1: of the ATO. But people with a help loan must
Speaker 1: tell their employer so that they know.
Speaker 2: To do this. Yes, so, as an employer myself, on
Speaker 2: everyone's pay slips, you can see that loan as a
Speaker 2: line item there, I guess.
Speaker 1: Okay.
Speaker 2: I want to turn now to a topic that is
Speaker 2: in the news very often. So let's just picture this.
Speaker 2: If you are taking out a normal loan, you usually
Speaker 2: pay interest on top of paying back the actual amount
Speaker 2: that you started with. But when it comes to student loans,
Speaker 2: there is no interest. Instead, there's something called indexation. And
Speaker 2: again it's something we've spoken a lot about. Can you
Speaker 2: just walk us through what actually is indexation?
Speaker 1: Yeah, and this is where the recent change that we're
Speaker 1: talking about today comes in. But first I'll explain what
Speaker 1: indexation is. So it's the way that an individual student
Speaker 1: loan debt is adjusted every year to reflect the changes
Speaker 1: in the cost of living. So, as we know, the
Speaker 1: value of money changes over time, and the indexation is
Speaker 1: designed to reflect that change in the value of money.
Speaker 1: Now to explain how indexation works, I'm going to explain
Speaker 1: how it worked previously, and then I'm going to explain
Speaker 1: how it works now since that change has come into effect.
Speaker 1: So previously, the indexation rate was only based on the
Speaker 1: consumer price index, which we know better as inflation, and
Speaker 1: that's a term that we have heard a lot about
Speaker 1: in recent years, obviously in the rising cost of living,
Speaker 1: and just for simplicity, we're going to call it inflation
Speaker 1: for the podcast. So Zara, you might remember that around
Speaker 1: two twenty train three that financial year, inflation was particularly
Speaker 1: high and that resulted in the indexation rate applied to
Speaker 1: help debts also being.
Speaker 2: High because they were tied at that point exactly.
Speaker 1: So in twenty twenty three, the student loan indexation rate
Speaker 1: was seven point one percent, that is a lot. That
Speaker 1: was the highest indexation rate applied to student loans in
Speaker 1: more than thirty years, and in twenty twenty four, it
Speaker 1: was also high at four point seven percent. Now, as
Speaker 1: you might remember, many weren't happy with that. The Daily
Speaker 1: OOS audience had.
Speaker 2: A lot to say common section, yeah, very loud, veryvoc and.
Speaker 1: So long story shot, the government decided to change what
Speaker 1: the indexation rate is based on.
Speaker 2: Okay, So you're saying, previously it was tied to indexation.
Speaker 2: But when inflation rose and that number became extremely high,
Speaker 2: so we were talking about seven point one percent, there
Speaker 2: was this push to change that rate and what it
Speaker 2: was Pegg two, What has that change been?
Speaker 1: Okay? So they decided that the indexation could be based
Speaker 1: on another measure, that one being the wage price index,
Speaker 1: which measures how much the average income changes over time.
Speaker 1: So you might remember that the conversation at the time
Speaker 1: was that inflation was rising at a rate that was
Speaker 1: much higher than what the average wages was and so
Speaker 1: they took that feedback on board, I guess, and changed
Speaker 1: it so that the rate of indexation could now be
Speaker 1: based on what is lower of either the rate of
Speaker 1: inflation or the rate of wage growth, and that will
Speaker 1: mean that your student loan is never growing faster than
Speaker 1: the average wage.
Speaker 2: Okay. So previously the rate of indexation was based on
Speaker 2: CPI on inflation. This change means that it will either
Speaker 2: be the rate of inflation or the rate of wage growth,
Speaker 2: whichever is lower exactly, Okay, And so when does this
Speaker 2: change come into effect.
Speaker 1: Well, they've actually backdated it, so it applies retrospectively from
Speaker 1: during twenty twenty three. So remember I said that in
Speaker 1: twenty twenty three the rate of indexation was at its
Speaker 1: highest level in more than thirty years, and seven point
Speaker 1: one percent that will retrospectively be changed to the rate
Speaker 1: of wage growth at the time, which at that time
Speaker 1: was lower than the rate of inflation at three point two.
Speaker 2: Percent, considerably lower.
Speaker 1: Yes, yeah, And the indexation rate for twenty twenty four
Speaker 1: will also be reduced from four point seven percent to
Speaker 1: four percent for the exact same reason.
Speaker 2: And for anyone who's listening to this and thinking about
Speaker 2: their debt, how do they find out how much relief
Speaker 2: this change might have brought them.
Speaker 1: So, if you had a help debt that was indexed
Speaker 1: on the first of June train twenty three or the
Speaker 1: first of June twenty twenty four, you've likely already received
Speaker 1: an indexation credit on your student loan debt and it's
Speaker 1: automatically applied, so you don't need to do anything to
Speaker 1: apply for this relief, and if you're wanting to check
Speaker 1: your loan, you can do that through your ATO online
Speaker 1: account using my gov.
Speaker 2: I just want to finish on talking about the timing
Speaker 2: of indexation. I think you have tried to explain this
Speaker 2: to me on about ten separate occasions. Going to admit,
Speaker 2: it's still really confusing for me. So a lot of
Speaker 2: people I think are in my camp and are time
Speaker 2: of bit confused. Talk me through the timing of indexation.
Speaker 1: This is confusing, but try to stay with me and
Speaker 1: you can tell me at the end to But all
Speaker 1: right if it makes sense. So, like like I said,
Speaker 1: if you have a help debt and you're earning over
Speaker 1: that minimum threshold that we discussed before, then you will
Speaker 1: usually have repayments being automatically withheld each pay cycle. However,
Speaker 1: the money being withheld from your pay each cycle doesn't
Speaker 1: pay off your loan straight away, so it's not immediately
Speaker 1: being deducted from your loan. It's basically put aside until
Speaker 1: after the end of the financial year, so it's not
Speaker 1: taken off the total loan amount until you have completed
Speaker 1: your tax return for that financial year when your total
Speaker 1: repayment income for the year is known, so then your
Speaker 1: compulsory repayment can be calculated because, like we said, they
Speaker 1: don't know how much of your HEX debt you need
Speaker 1: to repay until they know what your total income for
Speaker 1: that year is, and so that means that your repayments
Speaker 1: aren't deducted from your loan until after the indexation is applyed.
Speaker 2: Okay, I think I understand.
Speaker 1: I look forward to in a month's time you telling
Speaker 1: me exactly.
Speaker 2: The same question. Well, Billy, thank you for joining me
Speaker 2: on this lovely Sunday morning to talk through help and
Speaker 2: HEX and everything else we need to know. Very helpful
Speaker 2: for all of those unique students listening to properly understand
Speaker 2: how this works, how the system works, and what this
Speaker 2: change might mean for them. We'll be back again tomorrow
Speaker 2: morning with a deep dive, but until then, have a
Speaker 2: wonderful weekend.
Speaker 1: This podcast was produced with financial support from the Australian Government.
Speaker 1: My name is Lily Maddon and I'm a proud Arunda
Speaker 1: Bune Lung Chalcotin woman from Gadigl Country. The Daily oz
Speaker 1: acknowledges that this podcast is recorded on the lands of
Speaker 1: the Gadighl people and pays respect to all Aboriginal and
Speaker 1: Torres Straight Island and nations. We pay our respects to
Speaker 1: the first peoples of these countries, both past and present.