Everything You Need to Know About Your Australian Student Loan and the 20% Reduction

If you’ve got a student loan in Australia, you may have heard that the government has introduced a one-off 20% reduction on education loans, alongside new fairer repayment rules.

Here’s what you need to know.

What’s Changing?

Anyone with an outstanding student loan as at 1 June 2025 will have their balance cut by 20%. This applies to:

• HELP loans (HECS-HELP, FEE-HELP, OS-HELP, SA-HELP, STARTUP-HELP)
• VET Student Loans
• Australian Apprenticeship Support Loans
• Legacy schemes like the Student Financial Supplement Scheme.
  
  

Do You Need to Do Anything?

No. The ATO applies the reduction automatically. You don’t need to lodge a form or call anyone. Some individuals may have already seen the adjustment in their MyGov account, whereas others will see the adjustment in Mid-December. If you’ve paid off your loan since June, the ATO will look to credit the refund to your bank account (as long your details are up to date).

How Is It Calculated?

The 20% reduction is based on your loan balance as at 1 June 2025, before indexation. For example, if your debt was $10,000 on 1 June 2025, it will be indexed at 3.2% ($320), leaving you with a debt of $10,320. On top of the original loan balance, the indexation you received would be reduced from $320 to $256 to reflect the 20% reduction, leaving you with a debt of $8,256.

Indexation is also now capped at the lower of the Wage Price Index or Consumer Price Index to ensure your loan doesn’t grow faster than your income.

What About Repayments?

Repayments are handled through the tax system, the ATO calculates your compulsory repayment when you lodge your tax return based on your income.

You only start compulsory repayments when you earn $67,000 or more (up from $54,435 from 1 July 2024). For example, with reference to the below table, if you earn $70,000, you’ll pay 15% on the $3,000 above the threshold – just $450 for the year.

Voluntary Repayments

Voluntary repayments can still be made, but there is no discount applied.

If you plan to pay off your loan early, making the payment before 1 June will ensure you avoid indexation on any outstanding balance. However, you may wish to consider other obligations or goals, such as bank loans or house savings, before making any voluntary repayments.

Key Takeaways

• If you had a student loan on 1 June 2025, you’ll get a 20% reduction automatically.
• Repayments now start at an income level of $67,000.
• Voluntary repayments are optional, great for peace of mind, but consider if the money is better off deployed onto other loans or savings goals.
• Keep your ATO details updated to avoid missing any refund due to you.

If you would like to speak to an accountant about this please call 03 6223 6155 or [email protected] 

Disclaimer

This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, WLF Accounting & Advisory and its related entities, does not accept any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.  You should seek specific tax advice from us as your registered tax agent or registered tax (financial) adviser.