Understanding the new 20% student loan reduction

The Australian government has now legislated a 20% reduction in student loan debts, delivering relief to more than three million Australians with education and training loans. If you have—or recently had—a student loan, you may be wondering how the change affects you and when you’ll see your balance reduced.

Which Student Loans Qualify for the 20% Reduction?

The 20% student loan reduction applies broadly across the system. It covers:

• HELP and HECS‑HELP loans
• VET Student Loans
• Australian Apprenticeship Support Loans
• Student Startup Loans
• Older schemes, including the Student Financial Supplement Scheme

If you held any of these loans with an outstanding balance on 1 June 2025, you qualify for the reduction.

How the 20% Reduction Is Calculated

The ATO calculates the reduction based on your loan balance as at 1 June 2025, before annual indexation applies. You receive the full 20% reduction even if you:

• Made repayments after 1 June 2025
• Paid off your loan completely after that date

If you cleared your debt before 1 June 2025, the reduction does not apply. The law only covers loans that existed on that specific date.

Could the Reduction Result in a Refund?

Yes. If you paid off your loan after 1 June 2025, the 20% reduction may push your ATO account into credit. If you do not owe other tax or government debts, the ATO may issue a refund to your nominated bank account.

To avoid delays, make sure your bank details are up to date with the ATO.

When Will You See the Reduction Applied?

The ATO is responsible for applying the reduction and has been updating its systems to process the changes. Most people will see the 20% reduction applied by the end of 2025, with more complex cases finalised in early 2026.

Once processed, the ATO will notify you via myGov, SMS or email, and you’ll be able to view your updated balance through myGov or the ATO app.

Do You Need to Take Any Action?

No. The ATO applies the reduction automatically. You do not need to submit a form or contact the ATO to receive it.

Importantly, don’t delay lodging your tax return while waiting for the updated balance to appear. The reduction does not affect your obligation to lodge, and there is no benefit in waiting.

What to Do After Your Loan Is Reduced or Cleared

If the reduction pays off your loan in full, remember to notify your employer so they stop withholding additional student loan amounts from your pay.

If you expect a refund, double‑check that your bank details with the ATO are correct to ensure the payment reaches you without delay.