The Australian Government has announced a major relief measure for students and graduates with outstanding HELP (formerly HECS) debts. From 1 June 2025, a one-off 20% reduction will be applied to all eligible student loans — a move expected to benefit more than 3 million Australians.
This article outlines everything you need to know, including when it’s happening, why it’s happening, who it affects, how it will be applied, and what you should and shouldn’t do between now and then.
When Will the HECS Reduction Be Applied?
The reduction will be backdated to 1 June 2025, which is the same date the annual indexation typically occurs. Although Parliament isn’t expected to pass the legislation until after it resumes on 22 July 2025, the government has confirmed that the 20% reduction will still apply retrospectively.
In short:
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Eligible loan balances as at 1 June 2025 will receive the 20% reduction.
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Indexation for 2025 will also be capped at the lower of CPI or wage growth (a separate measure already confirmed).
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Once the law is passed, the ATO will automatically process reductions.
What Loans Will Be Reduced?
The reduction applies to most government student loan programs, including:
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HELP (Higher Education Loan Program) – previously known as HECS-HELP
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VET Student Loans
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FEE-HELP
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OS-HELP
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SA-HELP
Note: The loan must be outstanding as at 1 June 2025. If you repay the debt in full before this date, you won’t receive the 20% discount.
Why Is This Happening?
This reform follows widespread backlash after HELP debts were indexed by 7.1% in 2023 — the highest rate in more than 30 years — and 4.7% in 2024. These indexation increases hit borrowers hard, especially early-career professionals and parents with paused earnings.
The 20% reduction and indexation cap are part of the government’s response to the Australian Universities Accord, which recommended improving fairness and affordability in the higher education system.
How Much Will I Save?
Here are some quick examples:
| Outstanding HELP Debt | 20% Reduction | New Balance After Reduction |
|---|---|---|
| $10,000 | $2,000 | $8,000 |
| $27,600 (avg debt) | $5,520 | $22,080 |
| $50,000 | $10,000 | $40,000 |
The government has estimated this will reduce total national student debt by $3 billion.
Do I Need to Do Anything?
No – nothing is required.
The ATO will apply the reduction to your balance automatically after the legislation passes.
However, the ATO has issued some key points to be aware of:
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If you voluntarily repay any of your loan between 1 June and the date the law passes, you may still be entitled to a refund of the amount that would have been discounted.
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If you make repayments before 1 June, the loan balance will already be reduced and you won’t benefit from the discount.
What Else Is Changing?
From 1 July 2025, the minimum income threshold for HELP repayments will rise from $54,435 to $67,000. This means you won’t need to make compulsory student loan repayments unless you earn above $67,000 — giving lower and middle-income earners more breathing room.
A Quick Summary
| Key Change | Details |
|---|---|
| Date Applied | Backdated to 1 June 2025 |
| Amount | 20% reduction to all eligible student loans |
| Eligibility | Outstanding debt on 1 June 2025 |
| Action Needed | None – it will be automatic |
| Extra Tip | Hold off on voluntary repayments until after the law passes |
| Other Changes | Repayment threshold increases to $67,000 on 1 July 2025 |
If you’re not sure how this affects your specific situation — especially if you’re making regular voluntary repayments — feel free to get in touch. We’re here to help you make the most of these changes.
