Your HECS debt is set to fall
A Fairer Future for Students: Government Cuts HECS Debt by 20% and Raises Repayment Thresholds
In a move that’s set to ease the financial pressure on millions of Australians, the Federal Government has passed the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025—a landmark reform that delivers a 20% reduction in student loan debt and raises the income thresholds for repayments.
💸 What’s Changing?
Starting 1 June 2025, anyone with a HELP loan—including HECS-HELP, FEE-HELP, VET Student Loans, and others—will see their debt automatically reduced by 20%. That’s a significant cut, especially for those with large balances. For example, a $50,000 debt would drop to $40,000 overnight.
This one-off measure will benefit around 3 million Australians, wiping out nearly $16 billion in student debt. It builds on earlier reforms that capped indexation to the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI)—a change that already removed $3 billion in debt.
📈 New Repayment Thresholds
The bill doesn’t just cut debt—it also makes repayments more manageable. Starting in the 2025–26 financial year, the minimum repayment threshold will rise from $54,435 to $67,000. That means you won’t need to start repaying your HELP debt until your income reaches $67,000.
Even better, repayments will now be calculated only on the income above that threshold, rather than your entire annual income. This change ensures that repayments are fairer and more aligned with your ability to pay.
👩🎓 Who benefits
Let’s be honest—student debt has been a growing burden, especially for younger Australians. With 70% of HELP debt holders under 35, this reform couldn’t come at a better time. Whether you're saving for a home, starting a family, or just trying to get ahead, this change helps lighten the load.
However, some experts caution that while the bill helps recent graduates, it offers less support for current students and none for future students, potentially creating a “debt treadmill” for those entering university now.
🧾 What You Need to Do
Nothing. The 20% reduction will be automatically applied by the ATO based on your loan balance as of 1 June 2025, before indexation. You don’t need to fill out forms or lodge a request. Just keep an eye on your loan account for the update.
Final Thoughts
This bill is a big win for fairness and financial wellbeing. It recognises that education is an investment in Australia’s future—and that the cost of that investment shouldn’t hold people back. Whether you're a recent graduate or still studying, this is a step toward a more equitable system.
If you’d like help understanding how this change affects your finances or want to update your tax planning, feel free to reach out. We’re here to help.
