Labor¡¯s student debt wipe plan ¡®worth far less than billed¡¯

The Australian government is set to follow through on its election promise to cut student debt, but critics say its real benefit will be far smaller than promised.

In one of the first acts of the new parliament, a bill is expected to be tabled this week by the Labor government enacting the pledge, which has been credited as helping the party win its second term in office.

The bill, expected to pass with support from either the Greens or the Coalition, would see 20 per cent of all outstanding student loans ¨C including the Higher Education Loan Program (HELP), Vocational Education and Training (VET) and apprenticeship debts ¨C wiped automatically by the Australian Taxation Office.

Around three million Australians stand to benefit, with the government estimating A$16 billion (?7.7 million) in total debt relief.

¡°We promised cutting student debt would be the first thing we did back in parliament,¡± prime minister Anthony Albanese said.

¡°And this week we¡¯re introducing the legislation to make it happen. Because getting an education shouldn¡¯t mean a lifetime of debt.¡±

While the federal government has touted the measure as a major cost-of-living relief, analysis conducted by the Parliamentary Library at the request of the Greens shows the real-world benefit could be far smaller than advertised.

When inflation-driven indexation is accounted for, the 20 per cent reduction falls to just 7.9 per cent for many debt holders since?Labor?came to power in 2022.

According to the modelling, a graduate with A$30,000 in student debt in 2022 would ¨C after the government¡¯s indexation changes and proposed 20 per cent cut ¨C still owe A$27,619, representing a net reduction of only 7.9 per cent compared to their original balance. These figures assume no repayments have been made.

Senator?Mehreen?Faruqi, deputy leader of the Greens and the party¡¯s higher education spokesperson, said the move would do little to tackle the wider issue.

¡°Labor?crowing about a small one-off debt reduction won¡¯t fix the enormous burden of?uni?fees or student debt that keeps growing every year.

¡°Of course any student debt relief is better than none, but we are demanding all student debt be wiped and a return to free?uni?and [technical and further education], funded by taxing big corporations to pay their fair share.¡±

Faruqi?also criticised the government for failing to unwind the Coalition¡¯s controversial ¡°Job-Ready Graduates¡± (JRG) scheme, which drastically increased fees for certain degrees, particularly in the humanities. An arts degree now costs approximately A$50,000.

¡°In opposition,?Labor?spoke a big game against the Morrison Government¡¯s fee hikes for degrees like arts, business and law,¡±?Faruqi?said.

¡°In government, they¡¯ve shown their true colours, smashing students with A$50,000 arts degrees that grow every year and take a lifetime to pay off.¡±

Student groups have welcomed the relief but echoed the call for more systemic reform.

National Union of Students president Ashlyn Horton described the 20 per cent cut as ¡°a long overdue move¡± but said it ¡°doesn¡¯t come close to fixing the structural mess that got us here¡±.

¡°The core problem remains: students are still paying some of the highest fees in the OECD under a system that punishes them for choosing the ¡®wrong¡¯ degree,¡± Horton said.

Education Minister Jason Clare defended the move, highlighting the raising of the minimum repayment threshold from A$54,000 to A$67,000 as another measure that would ease the financial burden.

¡°You don¡¯t start paying off your university degree until your degree starts to pay off for you,¡± he said.

While the Greens are pressing for deeper reforms, including full debt abolition and a return to free tertiary education, the Coalition has indicated it is unlikely to oppose the legislation.

Shadow education spokesperson Jonathon?Duniam?said: ¡°We¡¯re not really in the business of standing in the way of cost-of-living relief.¡±

tash.mosheim@timeshigehreducation.com