Australia slashes student loan debt for over 3 million citizens

Prime Minister Anthony Albanese

Australia has passed landmark legislation to reduce student loan debt by 20 percent, offering immediate financial relief to more than three million people and eliminating over A$16 billion (approximately US$10 billion) in outstanding loans.

The new law applies retroactively to student debts as of June 1, 2025, meaning all eligible borrowers will automatically receive a one-fifth reduction in their loan balances. For the average student with a debt of A$27,600, this translates to a savings of around A$5,520 (US$3,500).

Prime Minister Anthony Albanese, whose administration made student debt reduction a core election promise, described the move as a direct response to the growing cost-of-living crisis and the soaring price of higher education.

“We promised cutting student debt would be the first thing we did back in Parliament and that’s exactly what we’ve done,” Albanese said. “Getting an education shouldn’t mean a lifetime of debt.”

The legislation also raises the repayment threshold for the Higher Education Loan Program (HELP) from A$54,435 to A$67,000. This change delays mandatory repayments for thousands of low- and middle-income earners, giving them greater breathing room in a tightening economy.

In addition, the government has implemented new indexation rules that cap annual loan increases based on either the Consumer Price Index (CPI) or wage growth whichever is lower. These updates are aimed at preventing steep annual hikes in debt amounts.

Education Minister Jason Clare praised the bill as a meaningful and practical reform that ensures education remains accessible and financially sustainable.

With this measure and earlier adjustments to indexation policy, the Albanese government has now cleared nearly A$20 billion in student loan debt over two years, marking one of the most comprehensive efforts to address education-related financial stress in Australia’s history.Borrowers are expected to see revised loan statements and official notifications from the Australian Taxation Office (ATO) in the coming weeks.