More than three million Australians will have their student debt wiped in a bid to win over younger voters crushed by the cost of living crisis.

Education Minister Jason Clare on Sunday announced the government would cap the Higher Education Loan Program (HELP) indexation rate, eliminating about $3 billion of student debt.

The capped rate would ensure indexation matched either the Consumer Price Index (CPI) or Wage Price Index (WPI) – whichever was lower – after Australians were slugged a student debt increase of 7.1 per cent in 2023.

The record increase was based on CPI, whereas under WPI, the debt spike would have only been 3.2 per cent.

The government said it would backdate the change – which formed part of the May federal budget – to student loans from June 1, 2023.

“This will wipe out around $3 billion in student debt from more than three million Australians,” Mr Clare said in a statement.

“The Universities Accord recommended indexing HELP loans to whatever is lower out of CPI and WPI.

“We are doing this, and going further.”

All HELP debts that were indexed in 2023 and would be subject to indexation on June 1, 2024, would get an indexation credit, the government said.

A person with an average HELP debt of $26,500 would have about $1200 cut from their outstanding loans this year under the change, pending legislation passing.

The credit for someone with $130,000 in student debt would be almost $5900.

Deputy Liberal leader Sussan Ley said she found the suggestion students who weren’t already paying back debt wouldn’t be worried about increases “really insulting”.

“They’re actually anxious when they see their student debt go up … they still see that amount going up and it’s quite scary for them and they know that it’s looming over them,” she told Sky News on Sunday.

“I don’t think students will feel particularly warm and welcoming of this announcement.”

The backdated change would apply to Australians with HELP debt, VET Student Loans, Australian Apprenticeship Support Loans and other student loans that existed on June 1, the government said.

“By backdating this reform to last year, we’re making sure that apprentices, trainees and students affected by last year’s jump in indexation get this important cost-of-living relief,” Skills and Training Minister Brendan O’Connor said in a statement.

Higher education experts have called for indexation to be capped since government said the backdated change would apply to Australians with HELP debt, VET Student Loans, Australian Apprenticeship Support Loans, and other student loans that existed on June 17.1 per cent increase in 2023.