A 20% cut to student debt announced by the Albanese government has come under scrutiny after parliamentary analysis revealed that, once indexation is accounted for, the actual reduction amounts closer to 7.9%. The finding has prompted fresh criticism from education advocates and economists who argue that the policy does little to ease the financial burden on graduates, particularly as student loans continue to accrue interest linked to inflation.

The discrepancy hinges on the way Australia’s Higher Education Loan Program (HELP) debt is indexed. Each year, student debt increases in line with inflation, and in recent years, that indexation has risen sharply—peaking at 7.1% in 2023. The government’s proposed 20% reduction, introduced as a blanket credit, applies only after debts have already been inflated, substantially diminishing its practical impact.

According to analysis referenced in Parliament and reiterated by several advocacy groups, the effective reduction in debt value—after adjusting for indexation—stands at just under 8%. The Greens, long-time proponents of higher education reform, have criticised the move as insufficient. “This is a band-aid response,” Senator Mehreen Faruqi said. “Students were promised real help, but once inflation is considered, this so-called 20% reduction is really only 7.9% off their actual debt. It does little to address the damage already done.”

A key criticism from both lawmakers and economists is that the policy may unintentionally reward higher-income earners, who tend to pay off their debts faster and thus are less exposed to the compounding effects of indexation. The e61 Institute, an Australian economic think tank, has argued that more targeted methods—such as tying debt relief to income or the length of time a loan has been held—would offer more equitable outcomes. “Without an income-based approach, the policy risks being regressive,” researchers from the institute suggested.

Meanwhile, long-standing issues within the tertiary funding model remain largely unaddressed. The Greens have pointed to the rising costs of degrees—arts degrees can now cost up to $50,000—and the retention of fee structures introduced under the former Morrison government’s “Job-Ready Graduates” reforms, which substantially increased tuition for some subjects. Senator Faruqi described the government’s approach as “tinkering around the edges”, saying that it “offers no path toward free and accessible education”.

Advocates have continued to press for more ambitious reform, including the cancellation of student debt and restoration of free university and TAFE education. While these proposals remain politically contentious, they are gaining traction amid broader debates about intergenerational inequality and the affordability of higher education in Australia.

The indexation formula itself has been a focus of recent government adjustments. In May 2024, amendments were introduced to recalibrate how student debt rises with inflation. Although this change has been welcomed in some quarters, critics note that it does not retroactively correct previous years of high indexation, meaning borrowers whose balances swelled in 2023 and earlier receive limited relief under the current scheme.

The student debt reduction forms part of a wider package of reforms by the federal government, which has also introduced measures in health and aged care sectors. Yet, for many across the political spectrum, the debate over HELP debt remains emblematic of deeper questions about how education is funded—and who ultimately benefits. As the real-world impact of the 20% cut unfolds, calls for a more robust and equitable approach to student debt are likely to intensify.