HECS/HELP debt reduction Bill introduced

On 23 July, the Labor government introduced legislation to deliver on its election commitment to reduce student debt by 20%. The Bill sets out a package of reforms designed to lower outstanding student loan balances and make repayments fairer.

What the HECS/HELP Debt Reduction Bill Proposes

The Bill proposes to:

• Apply a one‑off 20% reduction to Higher Education Loan Program (HELP) debts and certain other student loans that were incurred on or before 1 June 2025
• Increase the minimum repayment threshold from $54,435 in 2024–25 to $67,000 in 2025–26
• Introduce a marginal repayment system, under which compulsory student loan repayments apply only to income earned above $67,000, rather than being calculated as a percentage of total repayment income

These changes aim to reduce repayment pressure and ensure borrowers keep more of their income at lower earnings levels.

How the Bill Builds on Existing Student Loan Reforms

The proposed measures build on reforms passed in the previous Parliament that cap student loan indexation at the lower of the consumer price index (CPI) or the wage price index (WPI). This approach prevents student loan balances from increasing faster than wages over time.

Under the Bill, the new $67,000 repayment threshold will be indexed from 2026–27 onwards, but indexation will never exceed wages growth.

What Happens Next

The Bill must progress through Parliament before the proposed changes take effect. If passed, the reforms will significantly reduce outstanding student debt for eligible borrowers and change how repayments are calculated in future income years.