Uni debt relief set to benefit richer students more

Wealthier students are set to benefit more from future plans to cut university debt levels than those on lower incomes, research has shown.

Analysis into a federal government proposal to slash HECS debts by 20 per cent found more than half of the financial relief offered will go to the top third of earners.

Meanwhile, the study by the e61 Institute found less than 20 per cent of the measure will flow through to those in the bottom third.

The plan to cut tertiary education debt will be the first legislation introduced by the federal government in Anthony Albanese's second term when parliament resumes on July 22.

The cuts will be backdated to June, when debts increased by a further 3.2 per cent due to indexation.

The institute's research economist Matthew Maltman said modelling showed the cut would do little to speed up the repayment of student debt.

"If you simulate the effects of a 20 per cent cut on HELP debt holders, you find that for 80 per cent of recipients, the year in which they repay their debt is unchanged," he said.

"In terms of delivering cost-of-living relief or easing financial pressures on young people, the benefits of the policy are likely to be modest."

The average student debt is about $27,600, meaning $5520 would be cut off repayments.

The benefits of the debt reduction would also be dependent on when students completed their university degree, the institute's Jack Buckley said.

"Individuals who left university in 2024 will on average receive twice as much debt relief as those who left only four years earlier in 2020 and two and a half times as much as those who will leave four years later in 2028," he said.

"Two very similar people will receive very different amounts of debt relief simply because one finished their degree in 2024 and the other finished a few years earlier or later."

The institute has called for the 20 per cent reduction to be changed to a flat amount of about $5500 per student.

"Each former student with a HELP debt receives the same amount of support, or has their debt wiped, regardless of whether they studied law or teaching," Mr Buckley said.