20% Reduction in Student Loan Debt has passed Parliament and is now law

Dean Forte
2 hours ago
2 min read

Major Relief for Australian Graduates: 20% Reduction in Student Loan Debt Now Law!

Excellent news for Australian graduates and individuals with outstanding student loan debts! As of July 31, 2025, The Australian Government’s Universities Accord (Cutting Student Debt by 20 per cent) Bill 2025 has passed Parliament, enacting a 20% reduction in Higher Education Loan Program (HELP) and other student loan balances. This is a game-changer for many, offering tangible financial relief.

What Does This Mean for You?

One-Off 20% Reduction: A one-off 20% reduction will be applied to your outstanding HELP and other student loan balances as of June 1, 2025. To put this into perspective, an average HELP debt of $27,600 will see a reduction of approximately $5,520.
Automatic Application: You don't need to do anything! The Australian Taxation Office (ATO) will retrospectively apply this 20% reduction to all eligible student loans. They will also adjust the indexation that was applied on June 1, 2025.
Eligibility: Anyone with one of the following student loans as at 1 June 2025 will benefit from these measures:

Any of the HELP loans, including 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

Refund if HELP account subsequently fully repaid: As the 20% reduction applies to your debt as at 1 June 2025, voluntary or compulsory repayments made after this date will not affect the amount of your 20% reduction.
This means that there may be circumstances where the 20% reduction results in a credit to your HELP account, which may be refunded if you have no outstanding tax or other debts to the Commonwealth.
New Marginal Repayment System: Beyond the 20% reduction, the reforms introduce a new marginal repayment system. This is designed to lower your repayment amounts, making it easier to manage your living expenses as a graduate.
Increased Repayment Threshold: The income threshold at which you begin to repay your loan will increase from $54,435 to $67,000. This means you'll be able to earn significantly more before your repayment obligations kick in, allowing you to retain more of your hard-earned income.

These comprehensive changes are designed to alleviate financial pressure on student loan holders and significantly improve their ability to manage the cost of living.

If you'd like to know more about how these changes will impact you, please don't hesitate to reach out to us.

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DGF Advisory are Chartered Accountants and Business Advisors, with expertise and knowledge stemming from 18 years within the public practice, being trusted Advisors to SME'S and their families from a wide range of industries.

Book a FREE Discovery session and let's chat today at dean@dgfadvisory.com.au