More than half a million Australians will be able to make repayments on their student loans under the government’s student loan forgiveness scheme, with the final details of the scheme expected to be announced today.
The new scheme will provide Australians with the freedom to repay loans at any time they wish, with a range of conditions and exemptions, including those for those who were previously in debt, and those who are currently receiving disability support payments.
Key points:Students and their families who receive a loan from the Government’s student forgiveness scheme will have their repayments paid automaticallyThe repayment options for the scheme are as follows:Students can pay off their student loan from home in full for 10 years, with some restrictions including:Students who were eligible for student loan deferment can still make repayances, with those who did not have deferment in place in 2015 eligible to make payments.
Students will also be able make repayable payments to their parents’ or carers’ accounts.
The scheme is one of the government, as well as the Reserve Bank, attempts to help struggling borrowers get on their feet.
The program was announced in January as a pilot project, with about 2,000 Australians receiving their first payments, including 1,200 in each state and territory.
The first repayment period will begin on September 1, 2020, with payments for those in full by December 31, 2020.
The remaining repayments will start on January 1, 2021, with repayments being made on December 31 in each of the next four years.
The pilot project will also see people who are in a repayment deferment eligible for a reduction in their monthly payments, as they have a repayment obligation to repay the full amount owed.
The amount of repayments that will be made will depend on the length of the deferment, and on a number of factors including the length and severity of the disability or financial hardship.
The repayment terms for those currently receiving deferment will be as follows, with many of the conditions and exclusions being the same for all recipients.
These include:Students are not eligible for an immediate repayment deferral but can receive a one-off payment of up to $15,000 for the first four years of repayment, up to a maximum of $20,000 each year thereafter, with no maximums for the remaining three years of the program.
Students who receive deferred deferment on a permanent basis are eligible to receive up to one year’s repayments each year.
Debt-free borrowers will be eligible to repay up to two per cent of their income, depending on the duration of their deferment.
The plan also includes a reduction to the monthly amount of their loan that is payable over the course of the four years they are not in repayment.
These repayments are made from the account that has been allocated to them by the Department of Education, with repayment arrangements being made by the account holder.
This payment will be paid from the recipient’s bank account, rather than the loan they are currently carrying.
Students and other debtors will be encouraged to look into the repayment option of a personal loan or home loan, as these offer a reduction of up of 10 per cent in the annual amount of the loan over the term of the repayment.
A new repayment option for students who were in a deferment for more than two years is the payment of the balance of their current monthly repayments.
This is made through the student loan refinancing scheme, which allows borrowers to make a payment of no more than the outstanding principal balance of the student loans they are in repayment of, up front.
In addition, anyone who has been in a disability support payment or disability payments program for more then six months will be offered the option to make repayment from the personal loans they currently have outstanding.
While many borrowers will have a choice of repayment options, many people who have been in deferment and have made the required payments will not be eligible for the refinancing option.
The Government’s aim is to give Australians the freedom they need to repay their loans at the most opportune time.
“We know many Australians will struggle to repay this amount, so this is a great opportunity for Australians who need help to get on track,” Treasurer Scott Morrison said.
“It is an opportunity for many families to take the step of making repayments for their children’s and grandchildren’s education.”
The repayment of student loans is a major part of the Government and the Reserve’s work to address the debt crisis, particularly for people who earn more than $50,000.
“The Government has worked hard to ensure that our student loan repayment scheme provides people with the flexibility and confidence they need, with options to take on debt, repay their debt and get on with their lives,” Education Minister Christopher Pyne said.
Students have been urged to contact the Department on 1300 756 888 or email [email protected] for more information.