Critics Warn Planned 20 Percent Cut to Student Debt Could Burden Taxpayers, Spur Inequity

Students throw their caps in the air ahead of their graduation ceremony at the Royal Festival Hall in London on Oct. 13, 2015. Dan Kitwood/Getty Images

The Albanese Labor government’s plan to slash student debt by 20 percent has been criticised for unfairly burdening taxpayers and potentially stoking inflation.

Liberal frontbencher Paul Fletcher comparing it to pre-election promises made by former Queensland Premier Steven Miles.

Miles, who recently lost to the Liberal National Party, promised high-cost policies like free school lunches and 50 cent public transport tickets in a last ditch attempt to win over voters.

Federal MP Fletcher condemned the student debt proposal as “deeply unfair.”

“All 27 million Australians will be required to contribute to the cost of it, but 24 million Australians will not benefit from it,” he told ABC radio.

The government’s plan to write down 20 percent of student loans, effectively $16 billion of debt, would reduce the average Higher Education Contribution Scheme (HECS) debt of $27,600 per person, to about $5,500, according to government figures.

Senator Jane Hume echoed Fletcher’s concerns, arguing that the student debt write-off reflects a weak commitment to controlling inflation.

“This is a demonstration that the Albanese government has given up the fight on inflation,” she told Sky News, adding that she would pursue further scrutiny of the proposal’s costs in the Senate.

Experts and Economists Weigh In

Chris Richardson, one of Australia’s leading economists, criticised the move as inequitable.

“So handing $16 billion to graduates is a reverse Robin Hood: it’s a tax cut targeted to the big end of town, with money going from the less well off to the better off,” he wrote on X.

“It’s a fairness fail.

“Worse still, that $16 billion does nothing for the nation’s future. It doesn’t deliver incentives that’d make anyone more likely to study, or encourage anyone into work.”

Richardson also expressed concerns about the message this sends, noting it could discourage early repayments and spark expectations of further relief.

Meanwhile, Luke Sheehy, chief executive of Universities Australia, supported the policy, calling it “a big win for Australians with HECS debt.”

“We also hope it will give more people confidence to study at university. Australia needs a strong pipeline of skilled workers to ensure our future success, which means educating more graduates,” he said.

“HELP has opened the door to university for millions of Australians. It’s vital that the system continues to support the expansion of higher education as Australia’s need for graduates grows.”

However, the timing of the announcement has also drawn scrutiny.

Polling company RedBridge Group’s director, Kos Samaras, cautioned that delayed campaign pledges could backfire.

“When governments wait until the campaign period to present solutions—it’s like an ambulance arriving five hours after an emergency call. Too late. The damage is done,” writing on X.

He argued that the government now faces an electorate frustrated by the perceived lack of support.

Labor Ministers Defends Debt Relief Plan

Prime Minister Anthony Albanese has assured the government is being “transparent” about the budgetary impact of its proposal, rejecting any notion of withholding information from taxpayers.

Albanese clarified that the government has released estimated costs for these measures with the announcement.

He also pointed to the personal impact of the policy, explaining that the proposed write-off would reduce student debt for around 3 million Australians who, on average, owe $27,600.

“The HECS scheme was never meant to be a lifetime of debt, it was meant to be a contribution back to education,” he told ABC radio.

Albanese also criticised the previous Coalition government for transforming HECS from a “contribution scheme” into a “loan program” that treated student debt like borrowing for a car.

Education Minister Jason Clare defended the proposal as essential support for young Australians struggling financially.

“Many young Australians are finding it tough right now,” Clare said. “This measure will cut down costs for those starting out and help everyone carrying student debt.”

Skills and Training Minister Andrew Giles argued that the plan would not fuel inflation, describing it as “a sensible and considered measure.”

When questioned about the fiscal impact, Giles responded that university graduates, along with beneficiaries of Labor’s free TAFE program, would ultimately contribute to the economy through taxes.