Every Australian with a student debt will be able to earn more before they start repayments, with the Albanese government to announce major changes to repayment rules that will deliver cost-of-living relief.
The looming changes to the Higher Education Loan Program (HELP), previously known as HECS, were first revealed by this masthead on Friday and will see the minimum payment threshold – the earnings point at which a person begins to repay their student loan – rise more than $10,000 a year.
The government’s proposed changes to HELP debts mean graduates will not have to start repaying until they are earning $67,000 a year.Credit: Louie Douvis
That means that from 2025-26, a university graduate who has entered the workforce will not have to start repaying their HELP debt until they earn $67,000 a year, up from $54,435 a year.
A university graduate earning $70,000 a year will see their annual minimum repayments cut by about $1300, putting more money in their take-home pay, while someone earning $80,000 a year will see a cut in their HELP repayments of about $850 a year.
The average HELP debt-holder will be about $680 a year better off and the legislation to make these changes to the repayment system will be introduced to parliament early next year, setting up the policy shift as a key promise for the Albanese government in an election year and potentially as a point of difference with the Peter Dutton-led opposition.
However, the changes do not include a mooted plan to slash students’ debts by up to 20 per cent, which was also considered by the federal cabinet this week.
Labor MPs have been agitating for the government to offer more cost-of-living relief for younger people and win back support from younger voters, many of whom have been tempted away by the Greens’ calls to raise the threshold for repayments and, ultimately, to wipe all student debt.
Prime Minister Anthony Albanese.Credit: Alex Ellinghausen
Crucially, the prime minister will argue that the changes to HELP repayments are not inflationary and therefore do not risk delaying interest-rate cuts.
Prime Minister Anthony Albanese will announce the changes in a campaign rally in Adelaide on Sunday alongside South Australian Premier Peter Malinauskas. It comes after a dire week in which he battled daily questions about his flight upgrades and relationship with former Qantas chief executive Alan Joyce.
The government will also adopt a recommendation by the Universities Accord to move to a marginal repayment system for HELP.
At present, when a person earns between $54,435 and $62,850, 1 per cent of their salary is diverted to repaying their HELP debt. Once their pay increases to between $62,851 and $66,620, 2 per cent of their entire salary is taken to repay the debt.
Moving to a marginal repayment system means that people will pay the higher rate only on the portion of their income in the higher bracket, in a change modelled on Australia’s income tax system.
Before the speech on Sunday, Albanese said the changes were “what Labor governments do”.
“Labor will always be the party of education,” he said. “No matter where you live, no matter how much your parents earn – we will work to ensure the doors of opportunity are open for you. We will make it easier for young Australians to save in the future, and we are going to make the system better and fairer as well.”
The changes to HELP repayment requirements follow a decision in the last federal budget to wipe about $3 billion off student loans.
That change saved the average student an estimated $1200 last financial year on their HELP debt. It is not clear what the impact on the budget bottom line will be, with the cost of the measures yet to be revealed.
The reforms adopt the recommendations of a major expert review of universities earlier this year, which argued that the current system creates a perverse incentive for a person to stop their salary from rising above an arbitrary threshold.
The rising cost of degrees, including doubling the price of some arts degrees under the Morrison government and expensive postgraduate degrees, has led many people to incur debts in excess of $100,000. Australians contribute more to tertiary study than most people in other OECD nations.
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