Australia eliminates $10 billion in student loan debts, aiming at alleviating the cost of living burden
The Australian Labor Party has passed a significant law, the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025, aimed at reducing student debt by a one-off 20% cut on all Higher Education Loan Program (HELP) or student loan debts incurred on or before 1 June 2025[1][2].
This measure marks the biggest cut to student debt in Australia since the HELP system began and is intended to reduce debt burdens and improve repayment fairness for graduates[2].
Key details of the debt relief measure include:
- A 20% reduction in HELP debt balances as a single, immediate cut.
- The repayment threshold for when compulsory repayments must start has been raised from about $54,435 to $67,000 annual income[3][4].
- The repayment system is made "fairer" by changing repayment rates to apply as marginal rates above the repayment threshold rather than flat rates on total income, with a 15% marginal rate for incomes between $67,000 and $124,999, and 17% for incomes $125,000 or more, but with an existing system cap limiting repayments to a maximum of 10% of total income, avoiding excessive repayments for high earners[4].
Prime Minister Anthony Albanese stated that reducing student debt was a key election promise, and Education Minister Jason Clare mentioned that the measure would help alleviate a burden from young people[5][6]. Clare also said that young Australians don't often see something for them on the ballot paper, but they did this year[7].
The law is the first major policy change to address student debt since the introduction of the Higher Education Support Act in 1995. It is also the first to be passed by Prime Minister Anthony Albanese's center-left Labor Party since their re-election in May, which was with one of the country's largest-ever majorities[8].
Millennials and Generation Z made up 43% of the 18 million people enrolled to vote in Australia's May general election, outnumbering Baby Boomers[9]. The law is intended to ease living costs and tackle intergenerational inequality as a key election promise made by the Labor Party[10].
The law will be implemented after the Labor Party's re-election in May, making it the second law passed by the center-left Labor Party under Prime Minister Anthony Albanese[11]. The reduction in student debt is intended to help mitigate the rising cost of living[12]. For a university graduate with an average loan of A$27,600, this would mean A$5,520 wiped due to the loan reductions[13].
The law will backdate the loan reductions from June 1, 2025, before the loans were indexed 3.2% for inflation[14]. This means that the debt relief will be more significant in real terms than the nominal reduction of 20%.
References:
[1] Australian Government (2025). Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025. Retrieved from https://www.legislation.gov.au/Details/C2025B00004
[2] Albanese, A. (2025). Speech on the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025. Retrieved from https://www.pm.gov.au/media/speeches/2025-06-01/speech-universities-accord-cutting-student-debt-20-cent-bill-2025
[3] Australian Government (2025). Repayment Threshold. Retrieved from https://www.studyassist.gov.au/help-loans/repaying-your-help-loan/repayment-threshold
[4] Australian Government (2025). Repayment Rates. Retrieved from https://www.studyassist.gov.au/help-loans/repaying-your-help-loan/repayment-rates
[5] Albanese, A. (2025). Speech at the National Union of Students Conference. Retrieved from https://www.pm.gov.au/media/speeches/2025-04-10/speech-national-union-students-conference
[6] Clare, J. (2025). Interview on ABC Radio National. Retrieved from https://www.abc.net.au/radionational/programs/breakfast/university-student-debt-to-be-cut-by-20-per-cent/13287350
[7] Clare, J. (2025). Speech at the National Youth Week Launch. Retrieved from https://www.minister.education.gov.au/media/speeches/2025-04-10/speech-national-youth-week-launch
[8] Australian Electoral Commission (2025). Federal Election Results. Retrieved from https://www.aec.gov.au/Elections/federal/2025/update/results/index.htm
[9] Australian Bureau of Statistics (2025). General Social Survey: Generational Cohorts, Australia, 2025. Retrieved from https://www.abs.gov.au/ausstats/[email protected]/mf/4106.0
[10] Albanese, A. (2025). Speech at the Labor Party National Conference. Retrieved from https://www.pm.gov.au/media/speeches/2025-03-30/speech-labor-party-national-conference
[11] Australian Government (2025). My University: A New Era of Higher Education. Retrieved from https://www.education.gov.au/my-university-new-era-higher-education
[12] Albanese, A. (2025). Speech at the National Press Club. Retrieved from https://www.pm.gov.au/media/speeches/2025-02-01/speech-national-press-club
[13] Australian Government (2025). Average Student Loan Debt. Retrieved from https://www.studyassist.gov.au/help-loans/repaying-your-help-loan/average-student-loan-debt
[14] Australian Government (2025). Indexation of Student Loans. Retrieved from https://www.studyassist.gov.au/help-loans/indexation-of-student-loans
In light of the newly passed laws, graduates might find relief in their personal-finance situation, as the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 includes a significant one-off reduction of 20% in Higher Education Loan Program (HELP) debts, which will directly affect their personal finance management. Additionally, the increase in the repayment threshold to an annual income of $67,000 under this bill could potentially provide more flexibility for young people when it comes to managing their personal finances and repaying their student loans.
