Australia Cancels AUS$10 Billion in Student Loans to Alleviate Living Expenses
Labor Government Unveils Major Student Debt Relief Measure
The newly re-elected Labor Party, led by Prime Minister Anthony Albanese, has passed a significant bill aimed at reducing student debt in Australia. The Universities Accord (Cutting Student Debt by 20 per cent) Bill 2025, which will come into effect on June 1, 2025, will see a one-off reduction of 20% in all Higher Education Loan Program (HELP) or student loan debt for debts incurred on or before 1 June 2025.
This measure is estimated to provide relief to over three million university graduates, potentially cutting their debt by thousands of dollars. For a graduate with an average loan of A$27,600, this would mean A$5,520 being wiped off their debt. The government's reduction of student loans by one-fifth is equivalent to over A$16 billion in debt relief.
In addition to the debt reduction, the bill raises the minimum repayment threshold for student loans from an income of A$54,435 to A$67,000. This means graduates with incomes below A$67,000 are no longer required to make compulsory loan repayments, providing relief by making repayments fairer and more manageable in the context of rising living costs.
Education minister Jason Clare said the measure would help "take a weight" off the backs of young people. He also mentioned that young Australians voted for the Labor Party in their millions this year. The Labor Party framed cutting student debt as a way to seize on the generational shift in the electorate.
However, the relief has drawn some criticism. Opponents argue that the policy disproportionately benefits high-debt holders, such as those with multiple degrees or PhDs, who get larger absolute cuts, while many Australians who never attended university or have already paid off their debts receive no benefit. There are concerns about the policy’s fairness, especially given its estimated cost of $16 billion, which critics say impacts all taxpayers including those not gaining directly from the relief.
The changes to student debt are part of the Labor government's efforts to address intergenerational inequality and ease living costs. The new law was passed after the Labor Party was re-elected in May with one of the country's largest-ever majorities. Millennials and Generation Z made up 43% of the 18 million people enrolled to vote in Australia's May general election.
Prime Minister Albanese stated, "Getting an education shouldn't mean a lifetime of debt." He also emphasized that the measure to cut student debt was a promise made before the re-election. The law will be backdated from June 1, 2025, before the loans were indexed 3.2% for inflation.
The Labor government's student debt relief measure represents a major effort to reduce the burden of student debt amid cost-of-living pressures, although its fairness and broader economic impact continue to provoke debate.
- The Labor Party, led by Prime Minister Anthony Albanese, has passed a bill to reduce student debt in Australia, with the new law being referred to as the Universities Accord (Cutting Student Debt by 20 per cent) Bill 2025.
- The government will provide debt relief to over three million university graduates, with an average loan reduction of A$5,520 per graduate.
- The personal-finance situation of many graduates will improve significantly, as the bill raises the minimum repayment threshold for student loans from A$54,435 to A$67,000.
- The Labor government's student debt relief measure is part of their broader effort to address intergenerational inequality and ease living costs, which aligns with the values of millions of young Australians who voted for the party during the May general election.
- The government's A$16 billion investment in education and self-development through the reduction of student debt has sparked debate on its fairness and broader economic impact, as it may disproportionately benefit high-debt holders and affect all taxpayers, including those not reaping the benefits directly.
