Image: Anthony Albanese via ALP website
3 million Australians with HECS debt will see it reduced by 20 percent next month, following a promise made by the Labor government before the federal election, if they were re-elected.
Late last year, the Prime Minister announced a plan to reduce all student loan debt by 20% by June 1, 2025. This initiative would lower the average HELP debt of $27,000 by approximately $5,520, however it won’t take effect until a new parliament is sworn in at the end of July.
According to the Department of Education’s FAQ on the 20% HECS debt reduction, once the legislation is passed, the ATO will automatically apply the 20% reduction to students’ debt. The indexation already applied will also be adjusted accordingly.
What Happens with HECS Indexation?
Indexation is applied to outstanding student debt by the Australian Taxation Office (ATO) each year on June 1, in accordance with legal requirements and standard student loan administration procedures.
On June 1, 2025, a 3.2% indexation will be applied to all student debt. This 3.2% is determined based on the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). The ATO calculates this figure using data from the Australian Bureau of Statistics, ensuring that the value of student debt remains consistent with real terms.
Once the legislation is passed, the 20% reduction will be applied retroactively, and the previously applied indexation will be adjusted accordingly.
Federal Education Minister Jason Clare described the reduction as a piece of “significant reform” that would help to build a “better and fairer education system”.
“This builds on our changes to make indexation fairer and all up this means we are wiping close to $20 billion in student debt,” Clare said last November.
Education Minister Jason Clare Defends Labor’s Delay in Reducing HECS Debt Until After Election
MP Clare defended the government’s decision to wait until after the election to implement the 20% student debt reduction, despite calls from the Greens and others to legislate the pledge immediately in November last year.
Senator Mehreen Faruqi, Higher Education spokesperson, challenged Labor to legislate their student debt pledges urgently, stating, “Pledges are not enough, spiralling student debt must be tackled immediately.”
“It’s frankly irresponsible and cruel to be dangling student debt relief to win votes for an election when Labor is in government, and we have the opportunity and the numbers to do this now. People are sick and tired of being treated as pawns in a political game. Let’s start by getting some student debt relief passed immediately, then we’ll work to make the changes we need – wipe all student debt and make TAFE and uni free,” Senator Faruqi said at the time.
The Albanese government have stated that the reforms will expand on their efforts to make “substantial tertiary education reforms”, including:
- Delivering 500,000 Fee-Free TAFE places
- Doubling the number of University Study Hubs
- Introducing legislation to establish the Commonwealth Prac Payment and expand Fee-Free Uni Ready Courses; and
- A commitment to introduce a new managed growth and needs-based funding model for universities, and establish an Australian Tertiary Education Commission.
Minimum Repayment Threshold Changes Coming This July
Starting July 1, the minimum repayment threshold for student loans will increase from $54 000 to $67 000.
This change is aimed at offering much-needed cost-of-living relief, particularly for younger Australians, by ensuring that those with student debt will only begin repaying their loans once their income exceeds the new threshold.
Proposed repayment thresholds and estimated compulsory repayment amounts are available at Making student repayments fairer.
