Graduates will be able to earn more money before they start repaying their university debts under new laws to be introduced by the Albanese government next year.
The prime minister will announce the cost-of-living measure alongside the South Australian premier, Peter Malinauskas, at a campaign rally in Adelaide on Sunday.
The change would see the minimum repayment threshold lifted from $54,000 to $67,000 in 2025-26, with the average debt holder expected to save about $680 a year.
According to the government, a university graduate earning $70,000 a year would see their minimum repayments cut by about $1,300 a year. Those on $80,000 would save $850.
The change only applies to graduates earning less than $180,000 a year and would benefit about 3 million Australians.
The minimum payment threshold would also be indexed to always stay at 75% of graduate earnings, in line with recommendations of the universities accord final report, released in February.
Anthony Albanese is expected to describe the change as one of the “core elements of Labor’s policy agenda for a second term”.
“This will be the heart of the positive and ambitious agenda we take to the Australian people at the next election,” Albanese said in a statement.
“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 education minister, Jason Clare, said the change would not add to inflation pressure or influence the Reserve Bank’s decision making.
“That is not the advice we have received from Treasury,” Clare said.
“By reducing the amount people have to pay each year, this will encourage a lot more people to work more hours and particularly young women, who are unfairly affected by how the system works at the moment.”
The Greens, who are also appealing to a younger demographic for support, have welcomed the announcement but urged the government to introduce legislation next week, rather than next year.
“Labor wants people to wait till July next year when people need help now,” the party’s higher education spokesperson Mehreen Faruqi said.
“We’re calling on the prime minister to bring this legislation to parliament next week so we can pass it this year.”
Earlier this year, the federal government announced it would cut about $3bn in student debts through a key change to the Hecs and Help programs, reversing last year’s horror indexation hike and delivering a $1,200 saving for the average person.
It moved to ensure student debts could not outpace wage growth in the future by capping the indexation rate for Hecs and Help loans – tying them to whichever is lower of the consumer price index (CPI) or wage price index (WPI).
The accord, which is a blueprint for the future of tertiary education in Australia, acknowledged the Hecs/Help system could be “fairer and simpler”.
“Australians should not be deterred from higher education because of the increased burden of student loans,” the report said.
Since the Albanese government entered office, debts have risen by more than 16% – equivalent to more than $12bn.
ATO data showed Australians paid a record $2.9bn in voluntary Hecs/Help repayments in the 2022–23 financial year, up from $780m the previous year, in a bid to escape indexation.
It was equivalent to a 272% increase in voluntary repayments.
Earlier this year, the education officer of the National Union of Students, Grace Franco, said young people studying today faced the prospect of spending decades paying their debts.
“We’re set to be the most indebted generation in history,” she said.
“The Hecs system is broken. It’s impacting students’ abilities to afford houses, to start families, and to continue further education.”
