Australia pledges to slash $3 billion off student debt amid cost-of-living crisis

As Australia grapples with major inflation and cost-of-living pressures, the country’s government pledged to wipe out $2 billion in student loans. The centre-left Albanese government announced the initiative in its monthly budget on Sunday.

If the measure gets implemented, the Australian government will cut the debt of more than three million people. In a statement released on Sunday, Minister for Education Jason Clare said that the initiative would ease the economic pressure on the workers and students of Australia.

“Our Budget will be all about easing pressure on Australians and continuing the fight against inflation at the same time as we lay foundations for future growth in our economy,” the statement reads.

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“It will provide significant relief for students while continuing to protect the integrity and value of the HELP and other student loan systems, which have massively expanded tertiary access for more Australians,” the education minister furthered.

The need to control indexation increases

It is important to note that Australia allows university students to take out interest-free loans to finance their studies. The payments of these loans automatically get deducted from their salaries once they enter the workforce.

However, the recent steep indexation increases have seen a major debt rise even after students make repayments. In light of this, the Albanese administration noted that it will retrospectively cap the indexation rate for student loans and reduce it from a record 7.1 per cent to 3.2 per cent.

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