"Preparing for a Reduction in Your Portion of $80 Billion Student Debt"

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Australians with growing student debt will have to wait to see their balances reduced by 20 per cent, despite Education Minister Jason Clare saying it’s the government’s first priority.

However, the changes require legislation and parliament doesn’t commence until the end of July.

In the meantime, student loans will rise by 3.2 per cent due to annual indexation calculations (based off the Consumer Price Index).

So, how will these changes be applied?

When can we expect the cuts to be made?

Clare is adamant that the cuts to student loans will be the “very first legislation” Labor introduces when parliament returns on 22 July.

Once it’s passed, he confirmed that outstanding student debts will be wiped retrospectively.

Education Minister Jason Clare has announced cuts to student debts as well as changes to repayments from 1 July. Source: AAP / Lukas Coch

“The legislation will cut 20 per cent off your student debt and backdate it to 1 June, before indexation was applied,” Clare said in a statement to SBS News.

“This is a game-changer for the more than three million Australians with a student loan.”

This means the indexation that is applied on 1 June will be re-calculated by the Australian Taxation Office after the measure comes into effect.

These changes apply to several student support loans including HELP, VET Student Loan and the Australian Apprenticeship Support Loan.

The legislation should be passed quickly, breezing through the lower house where Labor holds 94 seats, and the upper house, where Labor and the Greens hold a majority.

The Greens are expected to vote for the changes as they supported wiping all student debt during their election campaign.

How much will the average Australian save?

University students and graduates will have roughly $5,500 cut from their student debts as a result of the changes,

HECS-HELP debt, which grew to roughly $80 billion in 2023-24, is considered a debt recovery measure instead of a revenue stream for the government.

For a graduate with $50,000 in student loans, their debt will be wiped by $10,000.

The reduction is on debts as of 1 June, so Australians who voluntarily decide to pay off their debts before this date will not be reimbursed.

A table showing how much Australians in each state and territory owe due to student loans and how much the average person will save from a 20 per cent cut.

What’s next in Labor’s student repayment reforms?

The minimum repayment threshold for student loans will also be raised on 1 July, offering cost-of-living relief for younger Australians.

Those with student debt will start repaying their loans once their income is above $67,000, instead of the current $54,000 threshold.

The amount you pay will no longer be a percentage of your income but instead will be a marginal repayment, as recommended by the Australian University Accord.

For someone earning $70,000, the compulsory repayment will be reduced by $1,300 annually.

The measures are a recognition that course fees have increased — spiking under the Morrison government’s Jobs-ready Graduates package — and younger Australians are paying high fees at a time when they are also looking to buy their first homes and start a family.

The Coalition did not support the cuts to student debt during the election campaign, arguing it was unfair for taxpayers to foot the bill.