To support young Australians amid rising living costs, the Australian Government has introduced legislation to reduce student loan debt by 20% and update the method for determining repayments. This approach aims to provide substantial, practical support.
20% reduction in student debt
The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:
· HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
· VET Student loans
· Australian Apprenticeship Support Loans
· Student Start-up Loans
· Student Financial Supplement Scheme.
The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and adjust the indexation accordingly. No action is needed from those with a student loan balance, and the Government has indicated that you will be notified once the reduction has been applied.
If you had a HELP debt showing on your ATO account as of 1 April 2025 but paid the debt off after 1 June 2025, then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.
The HELP debt estimator is a useful tool to get an idea of the reduction amount. Please reach out if you need assistance with determining eligibility.
Changes to repayments
The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.
The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.
Under the new repayment system, compulsory repayments for the 2025-26 year apply only to income above $67,000.
Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.
For many, the rule change means more disposable income now, but slower student loan repayment, unless they make voluntary repayments.
Repayment Estimators –https://www.education.gov.au/help-debt-reduction-and-repayment-estimators