Major Student Loan Changes Passed by Parliament
Significant reforms to the student loan system will take effect from mid-2025, delivering immediate debt relief and fairer repayments for millions of Australians.
The Australian Government will apply a 20% reduction to all student loans as at 1 June 2025, before indexation was applied, to reduce the debt burden for those with a student loan.
20% Automatic Debt Reduction
From 1 June 2025, all outstanding Higher Education Loan Program and other eligible student loans will be reduced by 20% for anyone with a balance on or before that date. The Australian Taxation Office will apply the reduction automatically before indexation, which will also be recalculated. For example, an average loan of $27,600 will be reduced by around $5,520.
From 1 July 2025, the compulsory repayment threshold will rise from $54,435 to $67,000. A new marginal repayment system will ensure only the portion of income within each threshold is charged at that rate, removing repayment “cliffs” and improving fairness.
These changes build on the 2024 reform capping loan indexation at the lower of the Consumer Price Index or the Wage Price Index. For 2025, this meant indexation was 3.2% rather than 3.7%, providing additional relief to borrowers.
No action is required. Once the legislation receives Royal Assent, the ATO will automatically apply the 20% reduction and indexation adjustment. You will be able to view your updated balance via your myGov account linked to the ATO.
If you are considering paying off your loan in full, you may wish to wait until your reduced balance is confirmed.
If your income is below the new $67,000 threshold, you will not be required to make compulsory repayments. Voluntary repayments remain available if you wish to pay down your debt sooner.
These changes apply to all Higher Education Loan Program debts, Vocational Education and Training Student Loans, Australian Apprenticeship Support Loans, and Student Start-up Loans.
Next steps
We can help with navigating through the changes that may apply to your particular situation. For further discussion, please feel free to contact our office.
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