By Tess Ikonomou and Kat Wong in Canberra

Millions of university graduates and students will soon wake up to an early Christmas present after the government wiped thousands of dollars off their debts.

Laws to cap the indexation rate for the Higher Education Loan Program at either the rate of inflation or the wage price index – whichever is lowest – passed federal parliament late Tuesday night after Australians were stung with a 7.1 per cent increase to their student debts in 2023 because of surging inflation.

The indexation changes will lead to $3 billion in debt being cleared over coming weeks.

“University is a lot more expensive today than when I was at university,” Education Minister Jason Clare told reporters in Canberra on Wednesday.

“Wiping $3 billion in debt will fix that spike in inflation that happened last year and it’ll make sure that never happens again.”

People with an average HELP debt level will get a $1200 reduction on their loans.

Those with a debt of $45,000 will get a decrease of about $2000, while students with $60,000 owning will have debt lowered by $2700.

The changes were recommended in the university accords, a review of the tertiary education sector handed down in February.

The laws mean university students completing placement will receive payments to help with living costs from July 2025.

Students in degrees including teaching, nursing, midwifery and social work will receive an allowance of $319 per week.

The reforms were a big win for students and graduates at a time when many Australians were struggling with the high cost of living, Universities Australia chief executive Luke Sheehy said.

Though universities have celebrated these measures, other government proposals for the sector have been widely spurned.

Labor has attempted to implement a cap on the number of foreign student arrivals from 2025.

The reform would be used in place of an immigration rule known as ministerial direction 107, that has throttled student visas.

Swinburne University of Technology vice-chancellor Pascale Quester has urged the government to replace the ministerial direction and prioritise visa processing for enrolments in science, technology, engineering and mathematics courses – collectively known as STEM subjects.

The number of domestic students taking these courses has dropped steadily, while international student interest has increased by 39 per cent since 2021.

“Forget a brain drain, we are at risk of a brain drought,” Professor Quester said.

“There is so much STEM talent in the region, but we have slammed the door in their faces with hastily-crafted policy.”

The government is also expected to slash a further 20 per cent off Australians’ student debt if it wins the federal election in 2025.