Student debt was previously just indexed to the Consumer Price Index (CPI) inflation rate, but the 2024 budget will change this to the lower of the Wage Price Index (WPI) or CPI.

This will be backdated to retroactively apply to last year's indexation (7.1%), which the government estimates could wipe more than $3 billion from existing student loans.

This was one of the major recommendations from the Australian Universities Accord - a review into the higher education system - and the government says it is part of the first stage of reforms implemented on the back of the review.

Minister for Skills and Training Brendan O'Connor said this continues the government's work to reduce financial barriers to education and training.

"By backdating this reform to last year, we're making sure that those with student loans affected by last year's jump in indexation get this important cost-of-living relief," he said.

However, Vince Scully, CEO and co-founder of financial planners Life Sherpa, said the changes are unlikely to amount to much long term.

"[This] will do little to improve the standard of living of graduates this year and is unlikely to affect indexation in future years significantly," he told

"CPI and WPI have historically been close, rarely differing by more than 1%.

"The recent inflation spike has led to a temporary widening of the gap as wages failed to keep up with inflation [but] HELP debtors should not expect the impact of the change in 2023 and 2024 to repeat in future years.

"Life Sherpa modelling shows it would have had a mere $180 annual impact over the decade to 2023 on an average HELP debt."

How much will your loan reduce?

Last June, all outstanding loan balances were increased by 7.1%, the highest indexation rate in 32 years.

If you owed $25,000, that became $26,775, while a $50,000 debt ballooned out to $53,550.

However, the annual WPI index last year was 3.2%, so anyone with a HECS/HELP debt will receive an indexation credit to reflect this, applying to all debts indexed in 2023 and subject to indexation this coming June.

The government estimates the following credits will apply for 2023 and 2024.

HECS balance Potential credit
$15,000 $670
$25,000 $1,120
$50,000 $2,245
$100,000 $4,485

What will the new indexation rate be?

Using the CPI numbers for the four quarters to March this year, the indexation rate for 2024 is 4.7%.

On 15 May, the WPI numbers for the first three months of 2024 will be released, so if the average WPI increase through the year is less than 4.7%, the indexation rate will be reduced.

Presuming the same method is used for the calculation, that means the indexation rate will come down as long as the annual WPI increase for Q1 2024 is less than 6.8%.

If wage growth over the year to March is 4.2%, the same as December, that would make HECS indexation for 2024 around 4%.

More comprehensive reform needed?

Mr Scully said the Government should not let this "minor tweak" to get in the way of more substantial reform.

"The HELP system... has failed to lift the proportion of students from lower socio-economic circumstances in the university population and has burdened our young people with a debt approaching 40% of the average first year graduate salary," he told

In his appearance on the Savings Tip Jar podcast, he said higher education policy needed to strike a balance between just having the Government pay for university and the current "lifestyle burden" on students.

"Paying for third level education out of general government revenue, or effectively having non-university goers subsidising university goers... doesn't make a lot of economic sense," he explained.

"[However] price should not be a barrier to... making sure we have our brightest young people getting the benefits of a good education because it benefits all of us."

"We [need] to get this balance right... [HELP debt] is becoming a lifestyle burden on graduates, so it does need to be reformed."

Picture by Redd F on Unsplash