Hecs Government Advances 20 Percent Student Loan Cut
Labor has introduced legislation to reduce student debt by 20 per cent, targeting over 3 million Australians. The bill, central to Labor’s re-election platform, entered parliament this week as the top legislative priority. The proposed changes aim to relieve the financial burden of Higher Education Loan Program (HELP) debts.
Labor party reduces student debt by 20%
Automatic Loan Reduction Expected in 2025
If passed, the new law will apply a one-off 20 per cent reduction to all HELP loans. The Australian Taxation Office (ATO) will implement this adjustment automatically using loan values as of 1 June 2025. This reduction will include HECS-HELP, FEE-HELP, VET Student Loans, and other income-contingent loan types.
The federal government confirmed that indexation will apply to the reduced loan amount. This year’s indexation rate is 3.2 per cent. Courses with census dates before 1 June will count, even if debts are not yet visible in ATO accounts. Australians who repaid their loans after 1 June 2025 may receive refunds. Those who fully repaid loans before that date will not benefit from the legislation.
Significant Changes to Repayment Thresholds and Rates
Labor’s bill also proposes changes to the repayment structure for HELP debts. The minimum income threshold for mandatory repayments will increase from $54,435 to $67,000. This change will ease pressure on lower-income earners.
Labor will also change the way repayments are calculated. Currently, repayment rates apply to an individual’s entire income once they pass the threshold. Under the new system, repayments will apply only to income above the threshold. For example, someone earning $70,000 will pay 15 per cent on $3,000 — a total of $450. Under the current system, they would pay $1,750, or 2.5 per cent of their entire income.
Preliminary figures suggest a flat 15 per cent rate will apply to income up to $125,000. Slightly higher rates will apply beyond that. Those earning over $180,000 will continue to pay at the same level as under the existing system. These changes are expected to apply from the 2025–26 financial year.
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Broad Political Support Positions Bill for Passage
Labor holds a clear majority in the House of Representatives. The party is confident the bill will pass through the lower house without difficulty. In the Senate, Labor needs support from either the Coalition or the Greens to pass the legislation.
Before the election, the Coalition opposed the debt reduction policy. However, recent signals from Coalition MPs suggest they may now back the proposal. The Greens, who support eliminating student debt indexation entirely, have expressed support for the bill’s core intent. They plan to propose amendments that go further than Labor’s bill.
Relief for Millions of Australians in Sight
Labor’s proposed student debt changes would impact roughly 3 million Australians. The bill provides targeted relief during a period of rising living costs and stagnant wage growth. With bipartisan backing now likely, the legislation may become law within weeks.
The proposed reforms reflect Labor’s strategy to ease cost-of-living pressures and improve access to hecs tertiary education. The government has emphasised that income-contingent loans will remain interest-free hecs and only repayable above defined thresholds.
Australians currently making payments or planning repayments hecs this year will see hecs the impact of these changes by the end of 2025. Those whose debts remain after the June cut-off will benefit from the automatic reduction and revised repayment terms.
The bill reinforces the government’s intent to reform Australia’s tertiary hecs funding system while maintaining a sustainable fiscal approach. Labor remains committed to delivering these changes in the current term.
