Australia Enacts Legislation to Reduce Student Debt by Over $3 Billion

The newly passed bill aims to eliminate over $3 billion (US$2 billion) in education debt for three million Australians.

Seen as a strategic move by the Albanese government to attract young voters before the elections, the legislation successfully made its way through Parliament on Nov. 26.

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

“This reverses the impact of last year and ensures it won’t happen again,” stated Education Minister Jason Clare.

An elevated indexation rate of 7.1 percent affected HELP loans in 2023 due to a CPI surge.

Additionally, Clare announced further commitments from the Labor government.

“Should we win the election next year, Labor plans to reduce all student debt by an additional 20 percent and make repayments more equitable,” he declared.

New Loan Indexation System

Under the bill, the government will eliminate last year’s 7.1 percent CPI indexation rate and substitute it with a lower WPI rate of 3.2 percent.

“We will also lower this year’s 4.7 percent rate to 4 percent,” Clare added.

He outlined that this reform would slash around $1,200 from the loan of someone with an average debt of $26,500 this year.

Debts of $45,000 and $60,000 would witness reductions of approximately $2,000 and almost $2,700, respectively.

The revised methodology will also be applicable 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 criticized the policy as “an extremely irresponsible decision,” indicating that it essentially shifts student debt to taxpayers.

Graham Young, Executive Director of the Australian Institute for Progress, cautioned that the reform might not bring significant benefits to students.

Free University-Ready Courses Initiative

The proposed bill also introduces a new Commonwealth grant scheme to finance groups of free university-ready courses.

“These are complimentary courses that bridge the gap between school and university, equipping students with the fundamental skills they need to excel,” Clare clarified.

He highlighted institutions like Newcastle University and the University of Tasmania, which already offer such programs.

These initiatives, according to him, have notably increased higher education enrollments, serving as a template for nationwide implementation.