ASFA rejects use of super to repay student debt

ASFA rejects use of super to repay student debt

Taylee Lewis
— 1 minute read

The Association of Superannuation Funds of Australia (ASFA) has warned against a recent government proposal to allow graduates access to superannuation to pay off debts associated with their tertiary education. 

ASFA said the proposal by Liberal Senator Chris Back yesterday – which would see graduates in their twenties and thirties access their superannuation to reduce their Higher Education Loan Program (HELP) debts – would have a “negative impact” on retirement outcomes.

Pauline Vamos, ASFA chief executive, said: “Any proposal allowing early access to superannuation to address the funding of pre-retirement needs comes with a number of problems, the most impactful being the exponential loss of compound interest within a long-term investment like super.”


It “doesn’t make sense”, said Ms Vamos, for an individual to pay off debt that attracts interest of approximately 2.5 per cent per year by reducing their superannuation savings, which earns an average of 7 per cent per year.

"With any proposal, a balance must always be struck between the benefit and the practicalities and the costs of implementation, including to the funds and to their members,” she said.

Mr Back said the plan could deliver significant budget savings, as reported by the ABC. Further, he said, allowing graduates to pay off their HELP debts owing to the government would ease the cost of living for young families. 

The Australian Institute of Superannuation Trustees (AIST), however, also rejected the proposal.

AIST executive manager of policy and research, David Haynes, said the purpose of superannuation is to provide a retirement income.

“The long-term benefit of superannuation is compound interest. Taking money out of super – particularly at a young age – will reduce this and impact on financial security in retirement,” said Mr Haynes.

“Removing even small amounts of super will hit retirement income,” he said.

Mr Haynes pointed out that using superannuation for purposes other than funding retirement could see an increased reliance on other government provisions, such as the age pension.


ASFA rejects use of super to repay student debt
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