The Australian Government has implemented significant reforms to the Higher Education Loan Program (HELP) to ease financial pressure on millions of students and graduates. These changes, which took full effect during the 2025-26 financial year, include a one-off 20 per cent reduction in outstanding student debt and a shift to a more flexible, marginal repayment system. These measures were designed to provide immediate cost-of-living relief and make the long-term process of repaying study loans more predictable and manageable for the workforce.
Under the new system, the minimum income threshold required to trigger compulsory repayments has been raised to $67,000. Furthermore, repayments are now calculated only on income earned above this threshold, rather than on an individual's total annual income. This change prevents the 'bracket creep' effect where a small increase in salary could previously lead to a disproportionately large jump in compulsory loan repayments. For most employees, this means lower annual repayments and more take-home pay.
The 20 per cent debt reduction was applied to all eligible student and training support debts that existed as of 1 June 2025. This move, which wiped out over $16 billion in debt, was processed automatically by the Australian Taxation Office (ATO). Borrowers do not need to take any action to receive this benefit, though many have already seen their updated balances reflected in their ATO online accounts via myGov.
These reforms build on earlier government actions to cap annual indexation. Since 2023, indexation has been tied to the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI), ensuring that debt growth does not outpace wage growth. As of 1 June 2026, an indexation rate of 2.8 per cent was applied to outstanding balances, marking the lowest rate since 2021. While these changes offer relief, the loans remain subject to annual indexation, meaning balances will continue to grow over time until fully repaid.