A win for those carrying student debt
Posted 26 September 2025
In support of young Australians and in response to the rising cost of living, the Australian Government has passed legislation to reduce student loan debt by 20% and change the way that loan repayments are determined.
20% reduction in student debt
The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:
- HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
- VET Student loans
- Australian Apprenticeship Support Loans
- Student Start-up Loans
- Student Financial Supplement Scheme.
The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied.
If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.
The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility.
Changes to repayments
The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.
The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.
Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. Importantly, the repayments will be calculated only against the portion of income that is above $67,000 moving forward.
Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.
For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.
As always, if you have any questions regarding the above, please contact your trusted Ruddicks adviser.
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The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 26 September 2025, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.
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