Greens leader Adam Bandt slammed for appearing to confuse HECS-HELP repayments with American student loans

Adam Bandt has copped backlash for a Tweet that appeared to confuse Australia’s student loan repayment system with the United States.

The Greens leader warned on Monday students would be forced to pay billions of dollars in interest on their HECS-HELP loan due to record rises in interest rates. 

“If you’ve got a student loan, these interest rate rises will hit you too,” Mr Bandt wrote in a Tweet. 

“Uni students are going to get hit with $2.7 billion in interest this year.

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“This isn’t sustainable. The Government needs to wipe student debt.”

But eagle-eyed social media users were quick to point out the Greens leader’s blunder.

“We don’t have student loans here in Australia, we have HECS which doesn’t accrue interest,” one person Tweeted. 

“They aren’t student loans Stop using US rhetoric, they are HECS/HELP debts,” said another.

“Your tweet should be reworded. HELP/HECS are not charged ‘interest’ they’re not the same as a personal/home loan and not linked to the cash rate,” added a third. 

In Australia, HECS debts don’t accumulate interest and are adjusted yearly according to an indexation applied by the Australian Taxation Office based on the Consumer Price Index.

While in the United States students are required to pay interest and any compounding interest on loans from the government, banks or private lenders.

Professor of Finance and Director of Academic Strategy at UNSW Business School Jerry Parwada said HECS is tied to indexation rather than interest rates due to a number of factors.

“While interest rate targets announced by the Reserve Bank of Australia are linked to inflation, the ‘headline’ rates that hit the public, for example on mortgages, are determined by individual banks based on their risk premia and funding costs,” he told SkyNews.com.au.

“The indexation rate used by the ATO is based on the CPI figures of the preceding two years (published around March), that is another reason why it should not be linked to the current interest rate environment even though it might be reflective of inflation.”

Almost three million Australians with an outstanding HECS-HELP debt were hit with a 3.9 per cent repayment increase from June 1 – up from last year’s rate of 0.6 per cent

This meant students with an average university debt of $23,685 were required to fork out an extra $920 in repayments.

Prof Parwada said indexation only applies to debt that remains unpaid for more than 11 months after a student has graduated. 

“As such, it is not the whole balance on which the indexation is applied. Therefore, how the indexation affects specific individuals depends on how quickly they are paying off their debt and how much they have owing that’s under 11 months of age,” he said.

Mr Bandt pledged to abolish student loan debts if the Greens seized the balance of power following May’s Federal Election. 

He said abolishing the loans, which totalled $66.6 million in 2020, would be funded by reversing the government’s proposed stage three tax cuts.

The Greens also vowed to make university and TAFE free.