Apr 14, 2025 Joel Hernandez
Proposed student debt cuts
In recent months, the federal government has introduced several reforms to alleviate the financial burden of student debt on millions of Australians. The measures aim at reducing existing debts while making higher education more affordable.
Proposed 20% cut to all student loan debts
In November 2024, the government announced a one-off 20% reduction in all Higher Education Loan Program (HELP) debt, VET Student loans, Apprenticeship Support loans and other student support loans, in an initiative expected to benefit around three million Australians, while reducing student debt by approximately $16 billion. An individual with an average HELP debt of $27,600 would anticipate a reduction of $5,520.
If the Albanese government wins the next election and legislation goes through, the Australian Taxation Office will automatically apply the reduction to your individual loan account before the next indexation on 1 June 2025. This means that indexation will only apply to your remaining loan.
Changes to HELP Repayment Thresholds and Marginal Rates of Repayment
The Australian Government is also looking at changing the repayment structure. Subject to the passing of legislation, a new minimum repayment threshold and marginal rates of repayment may apply from 1 July 2025. The minimum income threshold for repayments would increase from approximately $54,000 to $67,000. The repayments would also only be calculated on the income above $67,000 rather than the full yearly income. An individual earning around $70,000 would benefit from a payment reduction of approximately $1,300 per year.
Impact on Home Loan Borrowers
The government has directed financial regulators to ease home lending rules for those with student loans. The Australian Prudential Regulation Authority could allow banks to exclude HELP repayments from serviceability assessments.
At RDL, we are closely following the reforms and if you would like to understand how these could impact you, please contact one of our Tax and Business Services advisors.
