Federal Budget: Albanese Government reduces debts for uni students, apprentices amid cost-of-living crisis

Crippling student debts will be slashed for more than three million Australians as the Albanese Government moves to shield young people from more huge hikes amid the cost-of-living crisis by backdating changes to student loan schemes.

Under the reforms, someone with an average HELP debt of $26,500 will see around $1200 wiped from their outstanding loans.

The measure — contained in this month’s Budget — is expected to erase around $3 billion in student debt.

Pressure had been mounting on the Federal Government to adjust the HELP loan scheme in line with recommendations from its own higher education review, the Australian Universities Accord.

Crossbenchers and the Greens have been pushing the Government to act on student debts, arguing they were locking people out of the housing market and preventing them from starting families.

Repayment of HELP loans, also known by their old name of HECS, have always been tied to inflation rather than to wages growth.

Last year, that meant a $22,636 loan grew by around $1600 as the indexation rate spiked at 7.1 per cent.

Student loan debts were set to go up another 4.8 per cent on June 1 this year.

In response to the Universities Accord, the Government will now cap the HELP indexation rate to whichever is lower out of the Consumer Price Index or the Wage Price Index — with effect from June 1 last year.

According to the Government, last year’s indexation rate based on WPI would have been only 3.2 per cent, compared with the CPI indexation rate of 7.1 per cent.

The relief measure will be backdated to all HELP, VET, Australian Apprenticeship Support Loans and other student support loans that existed on June 1 last year.

Federal Education Minister Jason Clare said the reform would fix last year’s 7.1 per cent spike in indexation and prevent debt growth from outpacing wages in the future.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI,” he said. “We are doing this — and going further. We will backdate this reform to last year. This will wipe out what happened last year and make sure it never happens again.”

Skills and Training Minister Brendan O’Connor said the changes ensured that student support was provided on a fairer basis.

“By backdating this reform to last year, we’re making sure that apprentices, trainees and students affected by last year’s jump in indexation get this important cost-of-living relief,” he said.