There is good news, especially to Aussie graduates who have HECS student loans as they are likely to gain around $680 every year due to HECS reforms that will be put in place starting this financial year.
The groundbreaking reforms made to the HELP system by the Australian Government, has now been enacted as of July 1 2023 – greatly alleviating the burden of student debt for more than a million Australians. These reforms are the most extensive changes made to the HECS system in a period of multiple decades. They have addressed the most urgent issues regarding the fairness of repayment system.
What’s Changed?
For the 2025-26 financial year, the minimum repayment threshold has increased to $67, 000 from $54, 435. This means that the thousands of graduates who are up to this income head will be able to temporarily stop making compulsory payments by this time. More importantly, the system now uses marginal rates, so repayment is only on the income above the $67,000 threshold rather than on your total income if that is lower than $67,000.
Furthermore, all HELP outstanding debts will be written off and automatically reduced by 20%, with backdating to July 1, 2025. This one-off reduction is automatic and requires no documents to be submitted by the borrower.
Genuine Savings for Genuine Individuals
| Category | Old System | New System | Savings |
|---|---|---|---|
| Annual Income | $80,000 | $80,000 | – |
| Repayment Rate | 3.5% of total income | 15% of income above $67,000 | – |
| Annual Repayments | $2,800 | $1,950 | $850 |
| Fortnightly Savings | – | – | $33 |
| Original HECS Debt | $27,600 | $27,600 | – |
| Debt After 20% Reduction | $27,600 | $22,080 | $5,520 |
Who Takes the Prize?
30 percent of those paying the HELP debt are 35 years and below. This group is suffering the most due to housing, cost of living, and family pressure. This set of reforms especially targets younger Australian and as the government puts it “at a vital stage in their saving cycle for purchasing a first home and raising a family.” These reforms apply to all forms of student loans – HECS-HELP, FEE-HELP, VET Student Loans, and Australian Apprenticeship Support Loans.
The Indexation Relief
The 20% discount applies to outstanding debts as of 1 June 2025, and this discount is applied before the 3.2% indexation. In this case, the ATO is expected to retrospectively adjust the indexation so that graduates will not be prejudiced by the indexation timing. Graduates who are fortunate might end having a remaining balance, all thanks to the 20% debt reduction and recent payments, and this is possible if there are no other debts to the government, which might trigger refunds.
What is Required of You?
Nothing at all. Both the 20% debt reduction and the recent recalculated repayments will be made. You will be able to check your balance, which is likely to be updated before the end of the calendar year, through the MyGov portal. These reforms understand that many Australians are experiencing financial distress while at the same time wanting to provide access to higher education. This is the first major step toward a better, more equitable, and sustainable student loan system that takes high-paid graduates repayments into consideration.
