If you’re one of the millions of Australians with a Higher Education Loan Program (HELP) debt, you may be wondering how the government’s proposed changes to HELP loans will impact you. While these changes are still subject to legislation, they are expected to take effect by 1 June 2025. The government has stated that these reforms aim to provide relief and make the repayment process more manageable.

HELP Debt 20% Reduction

One of the most significant proposed changes is a one-time 20% reduction in all HELP debts. This reduction will be automatically applied by the ATO before the annual indexation on 1 June 2025. For example, if you have the average HELP balance of $27,600, you could see a reduction of approximately $5,520 in your debt. This initiative aims to alleviate the financial burden on over 3 million Australians, potentially saving more than $16 billion in student loan debt overall.

Changes in Repayment Thresholds and Rates

Starting 1 July 2025, the minimum income threshold for making compulsory HELP repayments will increase from $54,435 to $67,000. This means you will only begin repaying your HELP debt once your income exceeds $67,000. Although repayments will only be calculated on income above this threshold, the rates will be higher compared to the current system. Here’s a breakdown of the proposed new repayment rates:

• Income below $67,000: No repayment required.
• Income between $67,001 and $124,999: 15 cents for each dollar over $67,000.
• Income above $125,000: $8,700, plus 17 cents for each dollar over $125,000.

Example

Let’s consider an individual with a HELP debt earning $80,000 per year. Under the current system for 2024-2025, their repayment would be $2,800. However, under the proposed changes for 2025-2026, their repayment would be calculated only on income above $67,000:

• Income subject to repayment: $80,000 – $67,000 = $13,000.
• Repayment rate: 15 cents per dollar over $67,000.
• Total repayment: $13,000 × 0.15 = $1,950.

This would result in a reduction of $850 in their annual repayment, leaving them with more take-home pay.

Indexation Rate Adjustments

Another important change is the proposed capping of the HELP indexation rate. Once the legislation is passed, the indexation rate will be based on the lower of either the consumer price index (CPI) or the wage price index (WPI). This adjustment will be backdated to 1 June 2023 for all existing HELP, VET student loans, and similar accounts. If your HELP balance was indexed based on the CPI in 2023 and 2024, the ATO will adjust your account to reflect the lower indexation, potentially issuing a refund if your balance falls below zero.

What This Means for You

If these proposed changes are passed by Federal Parliament, they could significantly affect how and when you repay your HELP debt. With an increased repayment threshold and a 20% reduction in debt, these reforms are designed to improve your financial situation. For many, this will mean more money in your take-home pay and less stress about managing student debt.