Education Minister Proposes Legislation to Cut $3 Billion in Student Loan Debt

August 15, 2024 TruthUSA

As the government hopes this initiative will resonate with young voters, experts warn of financial implications.

The Albanese government has reintroduced a bill aimed at eliminating over $3 billion (US$2 billion) in education debt for three million Australians.

Education Minister Jason Clare presented the bill in Parliament, which some critics have labelled as a direct attempt by the Albanese government to woo young voters ahead of the elections.

The bill seeks to amend 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.

“The big hike in student debt last year hit a lot of Australians hard, particularly young Australians who made their voices heard. The Albanese government has listened, and we are acting,” Clare stated.

He announced that the government plans to erase last year’s unfair 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,” he said.

Clare explained that, for someone with an average debt of $26,500, this would result in around $1,200 being wiped from their outstanding loan this year.

“For someone with a debt of $45,000, it means a reduction of around $2,000, and for a debt of $60,000, the reduction is almost $2,700,” he added.

He also noted that the revised methodology would apply to VET student loans, Australian apprenticeship support loans, student startup loans, ABSTUDY student startup loans, and the Student Financial Supplement Scheme.

Student Debt Scheme Could Affect Inflation

While the government hopes this initiative will resonate with young voters, experts warn of financial implications.

Graham Young, Executive Director of the Australian Institute for Progress, argued that this could negatively impact inflation and government finances.

He also expressed concern that students might not notice the difference due to the scheme.

“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 said.

So far, the opposition has not reacted to the bill in Parliament during this session.

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

“These are free courses that are effectively a bridge between school and university to give students the foundational skills they need to succeed at university; some universities already offer these courses,” Clare said.

Clare highlighted that institutions like Newcastle University and the University of Tasmania already run such courses, which have led to a significant increase in higher education enrollments.

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