Government Announces Major Student Debt Relief: What It Means for You
In a landmark move fulfilling a key election promise, the Australian Government has introduced new legislation designed to ease the burden of student debt. The Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 aims to provide immediate financial relief and long-term repayment reform for thousands of Australians.
Key Features of the 2025 Student Loan Reform
1. One-Off 20% Reduction on Student Loan Balances
Effective for debts incurred on or before 1 June 2025, eligible HELP (Higher Education Loan Program) balances and other student loans under the Student Loans Acts will be reduced by 20%. This is a direct reduction of principal, not just an interest or indexation adjustment.
Example:
A student with a $30,000 HELP debt as of June 2025 will see their balance cut to $24,000 — a $6,000 saving.
2. Higher Minimum Repayment Threshold — Now $67,000
From the 2025–26 financial year onward, graduates will only be required to start repaying their student loans once their income exceeds $67,000, up from previous lower thresholds. This change is designed to reflect cost-of-living pressures and ensure repayments begin when earners are more financially stable.
3. New Marginal Repayment System
The government will implement a marginal repayment system, similar to how income tax works. Under this model, only the income earned above the $67,000 threshold will be used to calculate compulsory student loan repayments. This makes the system more equitable and ensures lower-income earners are not penalized for crossing the threshold by a small margin.
4. Indexation Linked to Wages, Not Inflation
To prevent excessive loan growth, the $67,000 repayment threshold will now be indexed annually in line with wage growth, rather than inflation. This change provides predictability and fairness, ensuring the threshold doesn’t increase faster than real incomes.
What This Means for Graduates and Young Professionals
These changes are particularly relevant for young professionals, early-career workers, and recent graduates who are still managing education debt. By cutting the loan balance and adjusting repayment thresholds, many Australians will see lower repayments or even delays in their repayment obligations, allowing them to focus on savings, home ownership, or other financial goals.
How Gavin M & Co Can Help
At Gavin M & Co, our experienced accountants can:
- Review your current HELP debt situation
- Model the impact of the 20% reduction on your finances
- Assess how the new threshold and marginal rates affect your cash flow
- Help you structure your salary, deductions, and budgeting plans efficiently
- Provide tax planning strategies that consider your student loan obligations
If you’re unsure how these new changes apply to you or your family, we’re here to help. With tailored advice and transparent guidance, Gavin M & Co is your partner in navigating complex financial reforms.
Speak With Us Today
Call: 03 9557 3138
Email: info@gavinmaandco.com.au
Website: www.gavinmaandco.com.au
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