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The federal government's plan to overhaul student loan repayments has received a mixed reception from economists, who say it misses the major problem with higher education costs.
As part of its pre-election pitch, the Albanese government has said it will raise the threshold for how much people can earn before they need to start repaying their Higher Education Loan Program (HELP) debt from $54,435 to $67,000, alongside changes to how repayments are calculated.
Student debt will also be reduced by 20 per cent. If re-elected next year, Labor's policy would benefit those with existing student loans as of June 1 2025.
The increased repayment income threshold has been broadly welcomed, but economists have told ABC News that Labor's policy would only help a sliver of university students and do little to ease cost-of-living pressures.
The proposal seeks to ease the burden of student loans, which have become more costly with rising tuition fees.
The government said the average student debt had increased from about $13,600 in 2010 to $27,600 today.
Popular degrees such as arts, law, and economics became more expensive, with a full arts degree now costing about $50,000, largely due to changes by the previous Coalition government.
Higher income threshold praised
Bruce Chapman, who was part of the team that first designed the HECS system, said raising the income threshold was very welcome, as the current threshold was "miles lower than it was intended to be".
"Some people are paying part of their HECS debt when they don't have enough income to justify it, so that's the most important thing," the emeritus professor said.
Currently, repayments are set as a percentage of total income. Under the changes, repayments would be calculated as a proportion of a person's income above the new $67,000 threshold.
"That is the most important thing that's happened to the system in 35 years," he said.
"It's a marginal collection, it's much gentler and much fairer than previously — we should have done it years ago."
Angela Jackson from Impact Economics agreed that the increase to the income threshold was a good move.
"It will help new graduates and people on lower incomes by reducing their HECS repayments, so I think that's positive and real reform," she said.
'How many coffees or lunches does that buy?'
Recent graduates and current students who are already working full time would benefit from the increased income threshold, according to Jack Thrower, a researcher at progressive think-tank The Australia Institute.
"Previously the threshold was not too far above the full-time minimum wage," he said.
"Last year one in seven full-time students were working full time, so if they were above minimum wage, they were already paying back their HECS while juggling everything else."
The other part of the proposal would see 20 per cent wiped off the current value of student loans. For example, an average HECS debt of $27,600 would go down to $22,080.
Despite the reduction in repayments and overall debts, Richard Holden, professor of economics at the University of New South Wales, argued the reforms would do little to ease cost-of-living pressures.
"It doesn't feel like it moves the needle. It's not like taking 20 per cent off someone's mortgage or car loan, so I don't see it having a big effect [on spending].
"Do your own calculations about how many coffees or lunches that buys," he said.
The broader economic impact, he said, would be the $12 to $16 billion added to national debt.
"That's just straight onto our net debt, so everything the treasurer said about paying down the debt, they just added $12 billion to it.
"It makes the country poorer and future taxes from everyone else are going to have to pay for that."
Dr Jackson said, from a fiscal perspective it was easy to see why the announcement was made — the debt relief was "off-budget" and therefore did not affect the government's underlying cash balance.
Student loans have been listed as off-budget as they are intended to be repaid.
Dr Jackson believed the debt relief was beneficial but did not directly address the high cost of degrees, which she said had risen disproportionately compared to other living expenses.
"Cutting student debt by 20 per cent will help, but it doesn't tackle the root issue of degree costs," she said.
"Arts degrees are now far more expensive than the cost of providing them, raising questions about whether these charges benefit students or the broader economy."
Calls to cut high cost of education
The economists ABC News spoke with agreed more needed to be done to cut the cost of higher education.
Professor Chapman said the price of university degrees was unsustainable.
"Down the track, the government needs to address the prices — the prices are wrong.
"Humanities degrees are too high, all the radical changes in prices happened in 2020 and they have to be undone."
Professor Holden said the most effective change the government could make would be to remove the former Coalition government's "Job-Ready Graduates Program".
The scheme increased the cost of certain degrees, including arts and philosophy, while dropping the cost of a course in priority areas such as teaching, nursing and science, technology, engineering, and mathematics (STEM).
It was widely criticised at the time for distorting degree subsidies based on arbitrary policy goals, he said.
"It's the number one thing for Labor government to get rid of."
Mr Thrower, from The Australia Institute, was also critical of the Job-Ready Graduates Program, and said the institute's research showed it led to only about 1.5 per cent of students changing their degree.
"People don't make decisions about their career based on the hard calculus of future earning vs debt from HECS," he said.
'It's vote buying'
Mr Thrower also noted that the 20 per cent reduction in student debt would disproportionately benefit higher-income earners, who had incurred higher debts from expensive degrees.
"Those in higher-paying fields, like law or economics, will see a larger reduction, potentially widening the gap between low and high earners."
Some of the most expensive degrees, such as medicine, produce some of the highest-earning graduates.
Professor Holden criticised the policy as "regressive", because while university graduates generally had higher incomes, only a select group would benefit from the proposal.
"People who have already finished paying their debt get nothing.
"People who are halfway through get half — so it's really quite a specific cohort of people who benefit from it," Professor Holden said.
"It's vote buying — it's trying to buy Green votes, I don't think it's any more complicated than that."