Australia pledges to slash about $2 billion from student debt

By Keira Wright

Australia plans to wipe out about A$3 billion ($2 billion) from student loans, cutting the debt of more than three million people, as the country continues to grapple with inflation and cost-of-living pressures.

The center-left Albanese government announced the measure in its monthly budget on Sunday in hopes that it would ease economic pressure on workers and students, said Minister for Education Jason Clare in a statement.

Australia allows university students to take out an interest-free loan to finance studies, with payments automatically deducted from their salary once they enter the workforce. Steep indexation increases have seen some debt rise, even after repayments.

The government said on Sunday it will retrospectively cap the indexation rate for student loans at the lower of either the Consumer Price Index or the Wage Price Index from the beginning of June last year, meaning 2023’s indexation of a record 7.1 per cent will be reduced to 3.2 per cent.

“This will wipe out what happened last year and make sure it never happens again,” Clare said in the statement. The changes will result in a reduction this year of about A$1,200 for students with an average debt of $26,500, pending the passage of legislation.