How much you could save under HECS changes

The Federal government has pledged to wipe billions in student debt. But who is eligible and how much could individuals benefit?

Millions of current and former Australians with student loan debt could see their balances slashed under a new proposal put forward by the Federal government.

Labor has promised that if it is re-elected to another term it will move to reduce all student loan balances by 20% - a measure which is says will erase billions of dollars' worth of debt.

"This is a game-changer for the more than three million Australians with a student loan," says Jason Clare, the Minister for Education.

"By June 1 next year, we will wipe around a further $16 billion from all Australians with a student dent, including Australians who went to uni and vocational education."

In response to the announcement, Shadow Treasurer Angus Taylor argued that the government was "picking winners" with the policy.

"There are very serious questions Labor needs to answer here. Labor needs to come clean on who pays for this, what the fiscal costs are, and how much Australian taxpayers will be paying for this desperate attempt to outbid the Greens before the election."

So from what we know at the moment, who would be eligible, how much will each individual benefit, and what's happening with related measures to student loan indexation? Let's get into it.

1. Which student loans will be eligible for debt relief?

While details are relatively scant at the moment, the government noted in announcing its new policy that the 20% loan relief would apply to all Australian Apprenticeship Support Loan, HECS-HELP, VET Student Loan and other student support loan accounts which exist on June 1, 2025.

2. When will student debt be wiped?

As Clare noted, the government's pledge is for the initiative to take effect from June 1 next year. However, there are a few caveats involved.

The first is that this is a promise that the government says it will only enact if it is re-elected. While there's no official election date yet, it's likely to be held by mid-May next year at the latest.

The second is that, assuming the government does retain power, the initiative will need to be legislated. Labor has promised that this will be the first piece of legislation it introduces in a new Parliament, but that doesn't necessarily mean that it will be passed quickly - or passed at all.

3. What kind of benefit will individuals see?

The 20% reduction will be applied uniformly across student loan balances. So depending on the amount of outstanding debt someone has, they could see hundreds, thousands or even tens of thousands of dollars wiped from their balance.

For example, the government says that someone with an average HECS-HELP balance of $27,600 at the start of June next year would see $5520 erased from their outstanding debt. Here's what the relief could look like on other HECS-HELP balances:

4. What are the criticisms of student debt relief?

Much of the argument that has been made against the policy so far has focused on its $16 billion price tag and the fact that the policy would only be a one-off measure which wouldn't address the size of loan balances for future students.

The government will reportedly seek to tackle the latter criticism through the establishment of the Australian Tertiary Education Commission which could provide advice to the government on setting university course fees, or set them itself.

5. What are the newly proposed loan repayment thresholds?

Just days before unveiling its debt relief policy, the government announced a separate proposal to amend the existing income threshold at which Australians with student loans are required to start paying back their debt.

The minimum threshold is currently $54,435, but the government says that it plans to introduce legislation in the new year which - if successful - would increase the minimum threshold to $67,000 from the start of the 2025-26 financial year.

The plan would also see a marginal repayment system introduced. That would mean that, going forward, repayments would be based on the portion of someone's income which sits above the $67,000 threshold - similar to how income tax works.

Current and former students with outstanding debt would see their repayments reduced by hundreds of dollars a year according to the government, though critics argue that the change will result in people paying off their loans more slowly and being impacted even more by indexation.

6. What's the latest on student loan indexation reform?

Speaking of indexation, as part of the 2024 Federal Budget released earlier in the year, the government announced a proposal to change the way student loan debt is indexed.

Under the change, loan balances would be indexed based on the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI) - a move which would be backdated from June 1, 2023. The government anticipates that the change would reduce student debt balances by around $3 billion.

For those wondering whether this change has actually been implemented or not, you haven't missed anything: the bill is still before parliament. The hope is that the legislation will be passed before the year is out.

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