HECS/HELP debt reduction Bill introduced

On 23 July, the Labor government introduced legislation aimed at enacting its election promise to reduce student debt by 20%. The Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 proposes to:

• provide a one-off 20% reduction to Higher Education Loan Program (HELP) debts in the Higher Education Support Act 2003, and other student loans provided under the Student Loans Acts that are incurred on or before 1 June 2025;
• increase the minimum repayment threshold from $54,435 in 2024–2025 to $67,000 in 2025–2026; and
• introduce a marginal repayment system where compulsory student loan repayments are calculated only on income above the new $67,000 threshold rather than having it based on a percentage of the repayment income.

This complements measures enacted in the last Parliament which cap the level of indexation of student loans to the lower amount of either the consumer price index (CPI) or the wage price index (WPI). This is designed to ensure that loans will never be indexed by more than wages growth. Accordingly, the new threshold of $67,000 will be indexed for 2026–2027 and following years, but will never be increased by a rate exceeding wages growth.

Background

A student who receives a HELP loan under any of the student loan schemes has an “accumulated HELP debt” with the ATO. The loan is subject to yearly indexation, but is otherwise interest-free.
Loans that are covered by the system include the following:

• HECS-HELP;
• FEE-HELP;
• OS-HELP;
• SA-HELP;
• Student Start-up Loan (SSL) Scheme;
• ABSTUDY Start-up Loan (ABSTUDY SSL) Scheme; and
• Australian apprenticeship support loan (AASL).

HELP, VSL, SSL and AASL debts are repaid through the tax system, although voluntary repayments can also be made at any time.

The amount to be repaid each year is a percentage of the taxpayer’s HELP repayment income (and is notified on the income tax assessment for the year). The percentage increases as the HELP repayment income increases. The “HELP repayment income” is effectively the sum of taxable income, reportable fringe benefits total, net exempt foreign employment income, reportable superannuation contributions and total net investment losses.

The Universities Accord (Student Support and Other Measures) Act 2024 amended the Higher Education Support Act 2003 to change how a person’s indexation rate is calculated by:

• capping the HELP indexation rate to be the lower of either the CPI or the WPI; and
• providing an indexation credit to people’s HELP accounts to ensure the new HELP indexation cap has effect from 1 June 2023.

In other words, where the WPI is lower than the CPI, the WPI will be used to determine the indexation factor. The intention is to ensure that outstanding loans never grow faster than average wages.

Interestingly, the WPI has only been lower than the CPI on four occasions this century. Apart from 2022–2023, the other major occasion was when the GST was introduced in 2000, which caused an inflationary spike. The WPI is generally likely to be below the CPI early in an inflationary period, but later on during an inflationary period, compensating wage increases will generally see the WPI being greater than the CPI. So it is usually the case that the WPI is higher than the CPI. This is particularly so during periods of “skill shortages”.

Source: Australian Govt - Making HELP and student loan repayments fairer 
Parliament of Australia - Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025