About three million Aussies are set to benefit, with up to $16 billion in student debt that could be wiped.

The debt reduction is to come before 1 July 2025, so indexation will only apply to the reduced balance.

On the average sized HECS debt of $27,600, that means about $5,520 will be wiped out.

Prime Minister Anthony Albanese says his Government will continue to make sure the education system is "fairer and affordable".

"This will help everyone with a student debt right now, whilst we work hard to deliver a better deal for every student in the years ahead."

It's the latest in a series of measures from the Albanese Government aimed to reduce the burden on students.

On Saturday, proposed amendments to the Higher Education Support Act were announced, increasing the income thresholds for when student debt is repaid.

The repayment system will also shift to a marginal rate instead of a fixed income percentage.

However, all of these proposals likely won't kick in until after the federal election next year, so may end up contingent on a Labor victory.

Will you benefit?

Minister for Skills and Training Andrew Giles points out it isn't just ex-university students who will have their debt reduced.

"This support applies to all government student loans including vocational training," he said.

"Whether you’re an apprentice or a tradie, a carer or a nurse, if you’re paying off a student loan you’ll receive this cost of living relief."

If you have an outstanding balance on any of the following student loans, your debt will be reduced:

  • Any Higher Education Loan Program (HELP) debt
    • Student contributions (HECS-HELP)
    • Tuition fees (FEE-HELP)
    • Overseas study expenses (OS-HELP)
    • Student services and amenities fees (SA-HELP)
  • Vocational Education and Training (VET) loans
  • Australian Apprenticeship Support Loans
  • Student Start-up Loan
  • Student Financial Supplement Scheme

New repayment rates

As it stands, Aussies with student loans have to pay a minimum percentage of their income depending on how much they earn.

For example, if you earn between $54,435-$62,850, at least 1% of your income has to go towards your debt.

If this legislation passes though, this will change to a marginal repayment rate, similar to how tax brackets work.

The minimum income threshold will increase to $67,000, and then repayments will be 15 cents for every dollar over, up to $124,999.

It follows the changes to indexation announced in May, whereby debts will be indexed to the lower of the Wage Price Index and the Consumer Price Index.

Picture by Mikael Kristenson on Unsplash