20% Student Debt Reduction
The Australian Government has announced a 20% reduction for all Higher Education Loan Program (HELP) and other student debts. This measure will reduce student loan debt by more than $16 billion and applies to all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other student support loan accounts.
Implementation Details
The debt reduction will take effect before 1 June 2025, with the Australian Taxation Office (ATO) automatically applying the reduction to outstanding balances for more than 3 million Australians. The reduction will be processed before annual indexation is applied on 1 June 2025.
For example, an individual with the average HELP balance of $27,600 will have $5,520 removed from their outstanding loan.
Legislative Requirements
Amendments to the Higher Education Support Act 2003 and other relevant legislation will be introduced to implement the 20% reduction. The debt reduction will be applied by the ATO following the passage of legislation and will take effect from 1 June 2025.
Fairer Student Loan Repayments
The Government is implementing changes to make the HELP and student loan repayment system more equitable. These reforms will benefit approximately one million Australians and are subject to legislative passage over the coming months.
Key Changes
Increased Minimum Repayment Threshold The minimum repayment threshold will increase from $54,435 in 2024-25 to $67,000 in 2025-26.
New Repayment Calculation Method Under the reformed system, HELP repayments will be calculated only on income above the $67,000 threshold, rather than being based on total annual income. This change ensures that individuals make smaller repayments in the early years of their loan and only begin repayments when they can afford to do so.
Proposed repayment thresholds with effect from 1 July 2025:
| Income Thresholds | Marginal Rate of Repayment |
|---|---|
| Below $67,000 | Nil |
| Income above $67,000 to $124,999 | 15c for each dollar over $67,000 |
| Income above $125,000 | $8,700 plus 17c for each dollar over $125,000 |
Our tax calculator has been updated with the new minimum repayment threshold and rates. To see this information, please select "HELP Debt" and choose the 2025-26 financial year tab.
Eligible Loan Types
Both the debt reduction and repayment reforms apply to the following loan types:
- All HELP loans (including HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
- VET Student Loans (VSL)
- VET FEE-HELP
- Student Financial Supplement Scheme (SFSS)
- Australian Apprenticeship Support Loans (AASL, formerly Trade Support Loans)
- Student Start-up Loan (SSL)
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
Background and Context
These reforms respond to recommendations from the Australian Universities Accord Final Report (February 2024), which called for HELP repayment arrangements to be reformed. Specifically, Recommendation 16b stated the need for "reducing the financial burden of repayment on lower-income earners and limiting disincentives to work additional hours by moving to a system of HELP repayment based on marginal rates."
The measures build upon previous Government initiatives, including the 2024-2025 Budget initiative to cap HELP indexation rates and reductions to indexation applied in 2023 and 2024, which reduced student debt by $3 billion. Combined, these reforms will reduce student debt by more than $19 billion for over 3 million Australians.
Impact
The combined reforms will provide direct cost-of-living relief by increasing take-home pay for over 1 million Australians. The changes particularly benefit lower-income earners by ensuring repayments align with individuals' capacity to pay and reducing the overall debt burden through the 20% reduction.