Australia announced a sweeping plan to forgive 20% of student debt
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- Australian prime minister Anthony Albanese said he would cut student debt by 20% next year.
- The move aims to boost "intergenerational equity" amid Labor's tight election race.
- The plan would erase $10.5 billion worth of debt — but not everyone is convinced it's worth it.
The Australian government on Sunday announced a sweeping plan to forgive 20% of student debt for around 3 million Australians.
The move, which takes effect in June next year if the current Labor government stays in power, would erase around $10.5 billion worth of debt.
"This will help everyone with a student debt right now, whilst we work hard to deliver a better deal for every student in the years ahead," Australian Prime Minister Anthony Albanese said on Sunday.
The government said that the changes would mean the average graduate with a loan of $18,200 would have $3,642 wiped from their bill.
The remaining debt would be repaid under a new scheme, with a minimum repayment threshold of $44,200.
The debt relief is designed to promote "intergenerational equity," Albanese told Australian Broadcasting Radio on Monday, according to Bloomberg.
"We know that 80% of the children who are in primary school today will need either a university degree or a Technical and Further Education qualification, not as an added bonus for their employment, but as a precondition to getting a job because of the changes that are happening in the economy."
It is likely also designed to boost support for the Labor government, which has been waning due to high inflation, high costs of living, and a housing shortage. A federal election is expected in May 2025.
However, not everyone is convinced it's the right move.
Andrew Norton, a Professor in the Practice of higher education policy at the Australian National University, said future debt should also be reduced.
"The last few years have highlighted how stressful and damaging high levels of student debt can be for younger Australians," he wrote in The Conversation.
"However, the Albanese government's plan comes with a high price tag and the priorities may not be entirely right," he added.
"Managing future debt, such as by reversing fee hikes under the Job-ready Graduates program, is as important as reducing old debt."
Richard Holden, a professor of economics at the University of New South Wales, said the changes would not ease students' cost-of-living pressures.
"It doesn't feel like it moves the needle," he told ABC News. "It's not like taking 20% off someone's mortgage or car loan, so I don't see it having a big effect."
In the US, the average student loan balance is around $38,000.
However, Biden's efforts to grant broad student loan relief have hit several stumbling blocks. The administration has introduced incremental batches of relief over the past few years.
As Business Insider's Ayelet Sheffey reported, Biden's second attempt at broader student-loan forgiveness is stalled in court.
Donald Trump and Kamala Harris have focused mainly on immigration, taxes, and the economy during their presidential campaigns, likely due to multiple polls indicating a downturn in interest on the issue.
Biden's Education Department is continuing to work on debt relief proposals; if finalized, the latest one would benefit 8 million borrowers facing hardship.