Government’s $3 Billion Student Debt Reduction Bill Clears Lower House

Australian Education Minister Jason Clare speaks during the Universities Australia Conference dinner at Parliament House in Canberra, Australia, on Feb. 22, 2023. AAP Image/Mick Tsikas

The Australian government is poised to reduce $3 billion in student debt, impacting over three million Australians, as the bill passed the lower house on Oct. 10.

Education Minister Jason Clare announced that the bill, which targets student debt relief, has successfully cleared the House of Representatives and will now be considered by the Senate.

“This is a crucial step forward in alleviating the financial burden for millions of Australians,” Clare said.

The bill will adjust the indexation of Higher Education Loan Program (HELP) debts, and link debt indexation to the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI), based on the Universities Accord recommendation.

Currently, HELP debts are indexed annually according to CPI, which can lead to increases in student debt beyond the borrower’s initial loan amount. The new model aims to offer fairer repayment terms.

“The passage of this bill through the House is a major win for Australians struggling with student debt, and we’re hopeful the Senate will take the necessary steps to ensure its swift implementation,” Clare added.

The bill was reintroduced in Parliament on Aug. 15, with Clare announcing government plans to erase last year’s 7.1 percent CPI indexation rate and replace it with a lower WPI rate of 3.2 percent.

“We’ll also reduce this year’s 4.7 percent rate to 4 percent,” he said.

Clare explained that, for someone with an average debt of $26,500, this would reduce their loan by around $1,200 this year.

“For someone with a debt of $45,000, it means a reduction of around $2,000, and for a debt of $60,000, the reduction is almost $2,700,” he added.

He also noted that the revised methodology would apply to VET student loans, Australian apprenticeship support loans, student startup loans, ABSTUDY student startup loans, and the Student Financial Supplement Scheme.

Student Debt Scheme Could Affect Inflation

While the government hopes this initiative will resonate with young voters, experts warn of financial implications.

Graham Young, Executive Director of the Australian Institute for Progress, argued that this could negatively impact inflation and government finances.

He also expressed concern that students might not notice much difference due to the scheme.

“Chances are students won’t really notice the reduction because their repayments won’t change; they will still pay the percentage commensurate with their income. The loan will just be paid off faster,” he told The Epoch Times.