Australians with student debts will see their repayments fall and won't begin paying down their debt until they earn more in a pre-election federal government move to ease cost of living pressures for younger Australians.

The government says the average student debt holder will pay about $680 less in repayments a year.

The changes would mean a shift to a marginal repayment system, as recommended by the Universities Accord, which found existing arrangements disproportionately affect those on lower incomes.

Under the proposal, repayments would operate similar to income tax thresholds where you pay a set rate per dollar above a certain level.

That rate per dollar increases as you move along the income scale.

The Albanese government's plan also lifts the minimum repayment threshold from $54,435 to $67,000 next financial year.

That threshold will also be indexed to stay at 75 per cent of average graduate earnings.

Changes to save HECS debt holders hundreds

A university graduate earning $70,000 a year would see a $1,300 reduction in their minimum repayments.

A graduate earning $80,000 a year would pay $850 less each year.

The measure applies to graduates earning up to $180,000 a year.

Prime Minister Anthony Albanese said legislation to implement the changes will be introduced to parliament next year.

"This will be the heart of the positive and ambitious agenda we take to the Australian people at the next election," he said.

"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.

"This is good for cost of living. Good for intergenerational fairness. Good for building Australia's future."

Latest change in HECS-HELP reform

The Albanese government used this year's budget to announce a change in the way loan repayments are indexed.

That proposal — which would mean loans would be indexed to match the lower out of the Consumer Price Index or Wage Price Index — is currently before the parliament.

It followed a 7.1 per cent increase in indexation in 2023, the largest since 1990.

The government has also flagged the potential for further changes to student loans.