Millions of Australians are set to have $3 billion worth of HECS-HELP debt wiped under a plan to revamp student loan indexation. The move was confirmed as Treasurer Jim Chalmers outlined the 2024 Federal Budget on Tuesday night.

Instead of interest, student debts rise each year in line with the consumer price index (CPI). But after an inflation blow-out, and millions being saddled with big increases, the government has moved to cap indexation to whichever is lowest out of CPI and the wage price index (WPI).

Yahoo Finance has put together a simple explainer to help you understand all the changes and how they will impact you.

Find out how the 2024 Federal Budget will impact you by following Yahoo Finance’s live coverage here.

Why is HECS indexation changing?

Basically, the debts were increasing at a higher rate than wages and if people were making minimum repayments, they were often finding their outstanding balance larger the following year.

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Yahoo Finance was flooded by 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. A change.org petition run by Independent federal MP Monique Ryan has attracted over 288,000 signatures.

This year student debts were set to jump 4.7 per cent, but is now estimated to be 4.0 per cent. Last year was even worse as debts rose by 7.1 per cent in line with CPI.

How is HECS indexation changing?

HECS-HELP debts will now increase in line with CPI or WPI, whichever is lower.

CPI measures the movement in the price of a fixed basket of goods and services. WPI measures the movement in wages, and the price employers pay for labour.

Both are measured across economic quarters of March, June, September and December.

The changes will also be backdated to erase last year's horror jump and applied as a credit to your debt.

The government said this will "prevent growth in debt outpacing wages in the future".

The changes will need to be passed by June 1 to bring down this year's incoming jump and undo last year's.

How much will my HECS debt go down by?

The bigger the debt, the bigger the savings.

Here's an estimation of the benefits or you can check using the government's calculator:

*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.