Understanding the 20% HELP loan reduction, new $67,000 threshold, and 3.2% indexation changes
The Australian Government has announced two major changes to the HECS/HELP system: a 20% reduction in all student loan debts and a significant increase in the minimum repayment threshold. These changes aim to make the student loan system fairer and reduce the financial burden on graduates, particularly helping younger Australians who are trying to save for a home or start a family.
The 20% debt reduction will be applied to all outstanding HECS/HELP debts as of June 1, 2025, before the annual indexation. The government has committed to introducing this legislation when Parliament sits from July 22, 2025. Once passed, the ATO will retrospectively apply the 20% reduction and adjust the indexation that was applied. The new repayment threshold of $67,000 will take effect from July 1, 2025, for the 2025-26 financial year.
Nothing! The changes will be automatically applied by the Australian Tax Office (ATO). If you have an outstanding HECS/HELP debt as of June 1, 2025, the 20% reduction will be automatically applied to your balance. You can check your updated debt balance through myGov once the reduction has been processed.
The 20% reduction will be applied to your total outstanding debt as of June 1, 2025. For example, if you have a $10,000 HECS debt, it will be reduced to $8,000. The average HECS debt of $27,600 will be reduced by approximately $5,520. This reduction will be applied before the annual indexation of 3.2% for 2025.
On June 1, 2025, indexation of 3.2% will be applied to all student debt as per normal. This rate is based on the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI). Once the legislation passes, the ATO will retrospectively apply the 20% reduction and adjust the indexation that was applied.
This is a personal decision that depends on your financial situation. If you pay off your debt before June 1, 2025, you won't receive the 20% reduction. If you make a voluntary repayment after June 1, 2025, it won't affect the amount of your 20% reduction. In some cases, the 20% reduction might result in a credit to your HELP account, which could be refunded if you have no other outstanding debts to the Commonwealth.
Around one million Australians will benefit from these changes. The changes apply to all types of student loans, including HECS-HELP, FEE-HELP, VET Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans, and the Student Financial Supplement Scheme. Around 70% of people repaying a HELP debt are 35 or younger, so this will particularly help younger Australians during a critical time for saving and major life decisions.
The changes are expected to be introduced to parliament when it sits from July 22, 2025. While the 20% reduction has been announced, it still needs to be passed into law. The government will need the support of either the Coalition or the Greens to get the changes through the Senate. Once passed, the ATO will automatically apply the 20% reduction to all eligible debts.