A sigh of relief for student debt relief

Student debt relief is on the horizon as the Albanese government is committing to wiping $3 billion for millions of Australians.

The decision by the government to assist Australians with their student debts comes after years of debate around the broken system seemingly exploiting people owing student loans. This was spurred by a petition led by independent Kooyong MP Monique Ryan that garnered 288,000 signatures.

Ryan, who has been extremely vocal towards the government on this matter, welcomed the announcement and declared it a “win”.

“Hundreds of thousands of Australians with HECS debts have worked hard to pay them off in recent years, only to see the size of their debts stay the same or – worse still – increase. It was a broken system. I’m glad the government has changed it,” said Ryan.

More than 3 million Australians will have around $3 billion shaved off their student debts, vowing that the horror indexation that occurred last year will never happen again.

The Australian government will cap the higher education (HELP) indexation rate at the lower of either the consumer price index (CPI) or the wage price index (WPI) with effect from 1 June 2023. This relief will be backdated to all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other student support loan accounts that existed on 1 June last year.

With the struggles happening in the property market and the damaging cost-of-living crisis, young Australians have been put in a tough situation in what should be some of the most hopeful and exciting stages of their life. The government was called upon to dissuade some of these pressures, and they have somewhat delivered, shrinking the average university debt by $1,200.

For example, someone with $100,000 owing on their student loans would have almost $4,500 cut from their overall student loan.

Reverting to the horror indexation that occurred last year, the average HELP debt of $26,500 increased by $1,881.50. If, instead, these debts were predicated on the WPI, they would have only paid 3.2 per cent on the loan, which calculates to $848.

The Independent Tertiary Education Council Australia (ITECA) announced a supportive statement of the action from the government, with chief executive Troy Williams stating: “The Australian government’s initiative will be most welcome for the millions of people with student debt struggling to deal with cost-of-living pressures.”

Williams also believed that more could be done to support students going forward, with one measure being the removal of the 20 per cent student loan tax on student debts.

“It’s abhorrent that the Australian government whacks a 20 per cent student loan tax on the debts of people investing in study to achieve their life and career goals. It’s time for the Australian government to end the student loan tax,” Williams said.

Education Minister Jason Clare believes the move will provide immediate and significant relief to those with student loans amid the fight against the cost-of-living crisis and inflation.

“This will wipe out around $3 billion in student debt from more than 3 million Australians. This will wipe out what happened last year and make sure it never happens again,” Clare said.

Discussions for a more radical form of student debt relief will no doubt forge on as many still see the system, even with the new measures, as one of exploitation and blatant robbery, especially if the 20 per cent tax that Williams alluded to resides. This is a step in the right direction for a government that is in a pressurised position due to the financial inequities across Australian society.