The Australian Government has passed new legislation to provide relief for citizens with student loans. The changes include a major reduction in existing debt and an adjustment to how repayments are calculated. This practical measure offers more substantial help than simplistic advice, such as cutting back on daily expenses.

A 20% Reduction in Student Debt

This initiative will automatically reduce the student debt burden for over three million people. It will wipe out more than $16 billion in outstanding student loans. The reduction applies to many common loan types, including:

• HELP loans (such as HECS-HELP and FEE-HELP)
  
• VET Student Loans
  
• Australian Apprenticeship Support Loans
  

The calculation will use the loan balance from June 1st, 2025. Indexation will then be applied only to this new, lower amount. The Australian Taxation Office (ATO) will handle this process automatically. No one needs to apply for the reduction. The government will notify individuals once their debt has been adjusted.

What happens if you recently paid off your loan? If your ATO account showed a HELP debt on April 1st, 2025, but you paid it in full after June 1st, you will normally receive a credit. The government should refund this credit if you have no other outstanding debts to the Commonwealth. You can use the HELP debt estimator tool to understand your potential reduction.

Changes to Repayments

The Government has updated the rules for HELP and student loan repayments, mainly by raising the income threshold before repayments are required.

For the 2025–26 financial year, the minimum repayment threshold will increase to $67,000, up from $56,156 in 2024–25 (and $54,435 in 2023–24).

Under the new system, individuals will only be required to make compulsory repayments if their income exceeds $67,000. Repayments will apply only to the portion of income above this threshold.

As before, repayments will be processed through the tax system and generally calculated when tax returns are lodged with the ATO.

For many borrowers, this change means greater short-term disposable income but a longer repayment period for student loans—unless they choose to make voluntary repayments.

If you have any questions related to student debt or repayments, feel free to talk to Bates Cosgrave team for further information.