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$3 billion in HECS-HELP debt to be wiped for millions of Aussies - here's how much you'll save

The government is changing the way student loan is indexed and will backdate it to June last year.

The federal government has announced it will wipe $3 billion from Australians' HECS-HELP debt. Millions of Australians have faced ballooning debts as student loans were indexed in line with inflation.

But, the government said it will move to adjust how the debt is indexed, so it's either in relation to the consumer price index (CPI) or wage price index (WPI), whichever is lower. This won't only benefit those facing a looming 4.7 per cent indexation this year, but it would also be backdated to undo the horror 7.1 per cent increase last year.

Yahoo Finance has been flooded with former and current students fearing for their futures; from reconsidering having children and jeopardised home loans, to regret over higher education and being forced to work 230 extra hours to pay it off in bulk.

Education minister Jason Clare next to graphic of person swinging on a graduation cap
Education minister Jason Clare has thrown a lifeline to Aussies struggling with their student debt. (Source: Getty)

Have you been struggling with HECS debt? Email stew.perrie@yahooinc.com

Education minister Jason Clare, who has been under pressure as signatures on a petition demanding change exceeded 288,000 supporters, said the move would provide much-needed relief to those who have been struggling with the collective debt of over $74 billion.

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“This will wipe out around $3 billion in student debt from more than three million Australians," he said.

“We are doing this, and going further. We will backdate this reform to last year. This will wipe out what happened last year and make sure it never happens again.”

The changes announced by the Albanese government will be introduced in the federal budget next week and will take effect from June, if they get through parliament.

The reform would adjust an indexation process that's been in place for almost 35 years and "prevent growth in debt outpacing wages in the future".

Last year's huge indexation spike is set to be revised to 3.2 per cent, in line with WPI.

"An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation," the government said.

This means the bigger the loan, the bigger the savings

Here's an estimation of the benefits:

HELP DEBT at 30 June 2023

TOTAL ESTIMATED CREDIT FOR 2023 AND 2024*

$15,000

$670

$25,000

$1,120

$30,000

$1,345

$35,000

$1,570

$40,000

$1,795

$45,000

$2,020

$50,000

$2,245

$60,000

$2,690

$100,000

$4,485

$130,000

$5,835

*Actual credit amount will vary depending on individual circumstances including repayments made during the year. All HELP debts that were indexed in 2023 and are subject to indexation on 1 June 2024 will receive an indexation credit.

The relief will also apply to apprentices with debt through the VET Student Loan program or Australian Apprenticeship Support Loan.

The move was recommended by the Universities Accord review, which has also called for a review of how student debt impacts home loan borrowing capacity and the timing of indexation to ensure it occurs after annual payments.

The federal budget will be handed down on Tuesday May 14.

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