Big Changes to HECS and HELP Loans from 1 July 2025

Written by Daniel Dubois

If you have a HELP or other study and training loan, there are some significant changes you may already know about. The good news? Most people will now pay less, and some will get a 20% cut to their loan balance.

A Higher Repayment Threshold

From 1 July 2025, the income threshold for making compulsory repayments will rise to $67,000 (up from $54,435).
This means:

  • If you earn $67,000 or less, you won’t need to make any compulsory repayments.

  • If you earn above that, you’ll only repay a portion of the income over $67,000.

  • Anyone earning $179,286 or more will still repay 10% of their total income, so they won’t be worse off.

How the New “Marginal” Repayment System Works

Previously, your repayment rate applied to your whole income once you passed the threshold. Now, it only applies to the income above $67,000 – similar to how income tax works.

Example:
Grace earns $80,000 and has a HELP debt.

  • Under the old rules, she would have repaid $2,800 (3.5% of her total income).

  • Under the new system, she’ll pay $1,950 (15% of the $13,000 above the new threshold).

That’s an $850 saving, and her employer will now withhold less tax from her pay.

A 20% Loan Reduction for Everyone

If you had a study or training loan as of 1 June 2025, you’ll receive a 20% reduction on your balance.

  • The discount is automatically applied – there’s nothing you need to do.

  • This discount is backdated to before indexation, and any excess indexation will be credited back to your account.

  • Most reductions will be processed before the end of 2025, though some complex cases may take until early 2026.

To make sure you’re notified once your reduction is applied, log in to myGov, link your ATO account, and double-check your contact and bank details are current.

Possible Refunds

If your loan ends up in credit after the 20% reduction, you could receive a refund (as long as you don’t owe any other tax debts). Refunds will be paid to your nominated bank account, so it’s worth checking those details are up to date too.

Estimating Your New Repayments

You can estimate your repayment and reduction using the Department of Education’s online calculator.

Note: the ATO’s repayment calculator won’t reflect the new changes until 1 July 2026, so it may currently show a higher estimate than what you’ll actually pay.

In short:

These changes make student loan repayments fairer and lighter on your wallet. With a higher income threshold, a more balanced repayment system, and a 20% loan reduction, most people will notice the difference when they lodge their 2026 tax return.

Jenni Anderson