Student Debt Slashed: New Law Offers Major Relief to Australian Graduates

Labor Government Delivers on Election Pledge with Historic Education Reform

In a significant shift in Australia’s approach to higher education and cost-of-living relief, Parliament passed landmark legislation on 31 July to reduce student loan debt by 20 per cent. This comprehensive reform will cancel over A$16 billion (US$10.31 billion) in debt for approximately three million Australians, fulfilling a key election promise by Prime Minister Anthony Albanese’s centre-left Labour government. The legislation represents the first major achievement of Labour’s new term, following its historic re-election in May, where it secured one of the largest parliamentary majorities in the nation’s history. Prime Minister Albanese described the reform as the realisation of a commitment to make education more affordable, stating that “getting an education shouldn’t mean a lifetime of debt.”

Education Minister Jason Clare emphasised that the policy would ease financial pressure on young Australians. He highlighted the pivotal role younger voters played in the election, noting they felt represented and supported Labour in large numbers. Clare further stated that the government was now acting on the trust placed in it by this generation. Millennials and Generation Z together accounted for 43 per cent of the 18 million registered voters in the May election, surpassing the Baby Boomer demographic. In response, Labour strategically positioned student debt relief as a central election pledge, presenting it both as a cost-of-living initiative and as a means of addressing intergenerational inequality.

The government stated that the 20 per cent reduction in student loans would provide immediate relief to around three million people. Under the policy, graduates with an average loan of A$27,600 will see A$5,520 of their debt erased. Crucially, the changes will be backdated to 1 June 2025, before the scheduled 3.2 per cent indexation of student loans for inflation. Additionally, the legislation will raise the minimum income threshold for compulsory loan repayments from A$54,435 to A$67,000, thereby easing the burden on lower-income earners and ensuring repayments begin only when graduates are more financially secure. In delivering this reform, the government signals a renewed commitment to educational equity and generational fairness.

Editor’s Note:

The Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 is an important step forward in Australia’s higher education policy. It brings in major changes to reduce the financial pressure on students and graduates, and shows the government’s commitment to making education fair and accessible. A one-time 20% cut to student loan debt, retroactive to June 1, 2025, will cancel over A$16 billion in loans for three million Australians, saving an average borrower A$5,520. Additionally, the minimum income for loan repayment has increased from A$54,435 to A$67,000, allowing graduates to earn more before repaying. Another change is the introduction of a marginal repayment system, which means people will only repay a small portion of the income they earn above the threshold, not their total income. This makes repayments fairer and more manageable.

Skoobuzz underlines that these reforms address student debt concerns, providing financial relief to young Australians, especially Millennials and Gen Z. The government views education as a public benefit, supporting graduates. This new law fulfils an election promise and is a smart investment in Australia's future, promoting fairness, opportunity, and support for the next generation.