The Albanese government will cut the student debt of more than 3 million Australians in this month's federal budget, wiping out about $3 billion worth of HECS and other debt.
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In a move that aims to ease cost-of-living pressures on students and working Australians struggling to pay off their degrees, the government will cap the HELP indexation rate to be the lower of either the consumer price index (CPI) or the wage price index (WPI) with effect from June 1, 2023.
The measure will implement a key recommendation of the Australian Universities Accord, and will be backdated to June 2023 for all HELP, VET Student Loan, Australian Apprenticeship Support Loan and other student support loan accounts that existed at that date.
The government has been under pressure to address the spiralling burden of student debt, which has been indexed at the rate of CPI, amid high inflation - which last year caused debts to go up by 7.1 per cent.
The move will ensure growth in debt does not outpace wages into the future.
The 2023 indexation rate based on WPI would only have been 3.2 per cent.
An individual with an average HELP debt of $26,500 will see around $1200 wiped from their outstanding HELP loans this year, pending the passage of legislation.
Education Minister Jason Clare said more than 3 million Australians would benefit.
"The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI," Mr Clare 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 budget measure would ease cost-of-living pressures for apprentices, trainees and students, and reduce financial barriers to education and training.
"VET Student Loans and Apprenticeship Support Loans enable many Australians who otherwise couldn't train or study to get the skills they need for secure and rewarding careers, and these changes make sure that help is provided on a fairer basis," Mr O'Connor said.
"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."
