Government Introduces Bill to Cut Student Debt by 20%

The Albanese Government has introduced new legislation to slash outstanding student debt by 20%, delivering long-awaited relief to millions of Australians. The move aims to ease cost-of-living pressures and follows through on a key Labor election promise.

Officials say the one-off reduction will wipe more than $16 billion from student loan balances across the country, benefiting over three million people.

Under the proposed law, 20% of all outstanding student debt – including HELP, VET Student Loans, apprenticeship loans and startup assistance – will be forgiven. The relief will apply retroactively from 1 June 2025.

For someone with the average student debt (around $27,600), that’s a reduction of roughly $5,520. Education Minister Jason Clare said the measure would give young Australians a fairer start. “Just out of uni, just getting started… this will take a weight off their back,” he said.

Key highlights of the legislation:

• 20% debt reduction on all student loans, calculated on the balance as of 1 June 2025.

• Higher repayment threshold, increasing from $54,435 to $67,000, so repayments start later in a graduate’s career.

• Lower repayment rates, meaning less money deducted each year. For example, someone earning $70,000 will pay around $1,300 less annually.

• Automatic processing through the ATO. No action is needed by borrowers.

The government previously amended the indexation formula to better reflect inflation, saving Australians over $3 billion. With this new measure, the total projected student debt relief now approaches $20 billion.

Prime Minister Anthony Albanese called the bill a step toward greater opportunity. “Getting an education shouldn’t mean a lifetime of debt,” he said.

The Universities Accord (Cutting Student Debt by 20%) Bill 2025 was introduced as the first order of business when Parliament resumed, underscoring the urgency of the reform. With strong signals of bipartisan support, it’s expected to pass with minimal resistance.

If enacted, the change will help a broad group of Australians – particularly recent university and TAFE graduates – build a future without being held back by long-term educational debt.