Australia Passes Law to Cut Over $3 Billion in Student Debt

The government takes action to retroactively fix last year’s soaring student loan indexation rate.

Students enter the University of New South Wales (UNSW) in Sydney, Australia, on Sept. 22, 2016. AAP Image/Dean Lewins

The bill aimed at eliminating over $3 billion (US$2 billion) in education debt for three million Australians is now law.

Seen as a direct move by the Albanese government to woo young voters ahead of the elections, the legislation passed through Parliament on Nov. 26.

The law amends the Higher Education Loan Program (HELP) indexation methodology, basing it on either the consumer price index (CPI) or the wage price index (WPI), depending on which is lower.

“This wipes out what happened last year and makes sure it never happens again,” stated Education Minister Jason Clare.

A high indexation rate of 7.1 percent was applied to HELP loans in 2023 due to the CPI spike.

He added that since the legislation has passed, the ATO would automatically apply the credits as soon as possible.

Clare also announced additional promises from the Labor government.

“If we win the election next year, Labor will cut all student debt by a further 20 percent and make repayments fairer,” he said.

New Loan Indexation System

Under the bill, the government plans to erase last year’s CPI indexation rate of 7.1 percent and replace it with a lower WPI rate of 3.2 percent.

“We’ll also reduce this year’s 4.7 percent rate to 4 percent,” Clare said.

He explained that for someone with an average debt of $26,500, this reform would wipe about $1,200 from their loan this year.

Debts of $45,000 and $60,000 would see reductions of around $2,000 and nearly $2,700, respectively.

The revised methodology will also apply to VET student loans, Australian apprenticeship support loans, student startup loans, ABSTUDY student startup loans, and the Student Financial Supplement Scheme.

Critics Warn Student Debt Reforms Could be Costly

Liberal Senator Jane Hum had called the policy “an incredibly irresponsible decision,” stating that it essentially transfers student debt to taxpayers.

Graham Young, Executive Director of the Australian Institute for Progress, warned that the reform might not yield noticeable benefits for students.

“Chances are students won’t really notice the reduction because their repayments won’t change; they will still pay the percentage commensurate with their income. The loan will just be paid off faster,” he told The Epoch Times.

Free University-Ready Courses Initiative

The bill also proposes a new Commonwealth grant scheme to fund clusters of free university-ready courses.

“These are free courses that effectively bridge the gap between school and university, giving students the foundational skills they need to succeed,” Clare said.

He pointed to institutions like Newcastle University and the University of Tasmania, which already offer such courses.

These programmes, he noted, have significantly boosted higher education enrolments, providing a model for broader national adoption.