HECS student debt to be slashed by 20 per cent – here’s what it means for you
Student loans are to be cut by 20 per cent, as the federal government passes legislation which will see about $16 billion erased. See what it means and how it will work.
Prime Minister Anthony Albanese promised to cut 20 per cent of student debt if he was re-elected nine months ago, now the legislation finally passed parliament on Thursday.
Australians with student debt will have their loans slashed by a fifth by the end of the year, with a text message sent once the process is complete.
Education minister Jason Clare thanked Opposition leader Sussan Ley for the bipartisan support of the bill.
“Australians, I think, want us to work together on the big things that matter to help Australians, and particularly on the childcare matter where it could have been very different,” he said.
“The decision of Sussan and Jonno, the Shadow Minister, to work constructively with us, I take my hat off to them. This is what Australians want of us.
How much will I save?
The changes will slash about $16bn of student loans for millions of debtors.
Three million Aussies are set to get an average of $5520 wiped off the average loan of $27600.
Those with loans exceeding $60,000 could see their debt wiped by more than $12,000.
What is changing?
Aside from a 20 per cent cut, the government has also proposed that the HECS repayment threshold by nearly $10,000, in a bid to ease cost-of-living pressures.
The minimum salary threshold, which accounts for how much you have to earn before you need to start paying off loans, is proposed to increase from $56,156 to $67,000.
This can save $1,300 per year for those earning $70,000.
Currently, if you earn between $56,156 and $64,837 per year, 1 per cent of your wage goes to paying off your HECS.
This goes up by 0.5 per cent depending on how much you earn, with the maximum being 10 per cent for those earning over $164,712 per year.
Who does the loan apply to?
The loan reductions will not just apply to HECS debts, but also Vocational Education and Training Student Loans, Student Startup Loans, Australian Apprenticeship Support loans and others.
The once-off reduction will be backdated to June 1, before this year’s indexation was applied.
You do not have to do anything to access the cuts – it will show up on your account in the next few months as the Australian Tax Office programs systems to usher in this change.
When will relief come into effect?
It is unknown when exactly the relief is coming into effect, as the ATO will have to “write about 50,000 lines of code” to process the cuts and “make sure they get it right”, according to Mr Clare.
However Mr Clare has assured that the passing of the legislation means changes are “guaranteed” despite how long it takes.
However, it will come in the next few months once the system is updated.
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Originally published as HECS student debt to be slashed by 20 per cent – here’s what it means for you
