A win for those carrying student debt

Oct 17, 2025 | Student Loans

Win for Those With Student Loans

Student Loan Debt Relief: What the 20% HELP Debt Reduction Means for You

If you’re one of the millions of Australians juggling student debt alongside Newcastle’s rising cost of living, I’ve got some genuinely good news to share. The Australian Government has just passed legislation that will reduce your student loan debt by 20% and make repayments more manageable. And no, the solution doesn’t involve giving up your morning coffee or smashed avo!

Understanding Your 20% Student Debt Reduction

This isn’t just a token gesture, we’re talking about real relief for over 3 million Australians, with more than $16 billion in outstanding student loan debt being wiped out. Having worked with many clients managing HELP debt, this is significant.

Which Student Loans Are Eligible?

The 20% reduction applies automatically if you have any of these student loans:

  • HELP loans (including HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, and OS-HELP)
  • VET Student Loans (vocational education and training)
  • Australian Apprenticeship Support Loans
  • Student Start-up Loans
  • Student Financial Supplement Scheme debts

How the HELP Debt Reduction Actually Works

Here’s what you need to know:

Your loan balance on 1 June 2025 (before indexation) is what matters. The ATO will:

  1. Calculate your 20% reduction based on that balance
  2. Apply the reduction automatically
  3. Only apply indexation to your reduced balance
  4. Process everything retrospectively and adjust the indexation accordingly

You don’t need to do anything. The ATO will notify you once the reduction has been applied to your account.

What If You’ve Already Paid Off Your HELP Debt?

If you had a HELP debt on 1 April 2025 but paid it off after 1 June 2025, you’ll likely see a credit appear in your HELP account. Provided you don’t have other outstanding tax or Commonwealth debts, this credit should be refunded to you.

Want to estimate how much your reduction might be? The HELP debt estimator is a handy tool. If you’re unsure about your eligibility or want help working through the numbers, give us a call on 4926 4155—we’re happy to help.

Major Changes to Student Loan Repayment Thresholds

Beyond the 20% reduction, the Government has fundamentally changed how HELP debt repayments work, and for most people, this is equally important news.

Higher Minimum Repayment Threshold

The minimum income threshold before you need to start making compulsory HELP repayments has increased significantly:

  • 2024-25 financial year: $54,435
  • 2025-26 financial year: $67,000

That’s a jump of more than $12,000! This means if your income is below $67,000 in the 2025-26 year, you won’t need to make any compulsory student loan repayments.

How the New Repayment System Works

Here’s where it gets interesting. Under the new system, repayments are only calculated on the portion of your income above $67,000, not your entire income.

Example: If you earn $77,000 in the 2025-26 year:

  • Old system: Repayment calculated on full $77,000
  • New system: Repayment only calculated on $10,000 (the amount above the $67,000 threshold)

This is a fairer system that puts more money back in your pocket when you need it most.

Understanding the Trade-Off

While these changes give you more disposable income in the short term—brilliant news if you’re trying to save for a house deposit or just manage Newcastle’s cost of living—it will take longer to pay off your student debt if you only make compulsory repayments.

However, you can still make voluntary repayments at any time if you want to pay down your HELP debt faster. The choice is yours.

What This Means for Your Tax Return

Student loan repayments continue to be processed through the tax system. This means:

  • Your repayment obligation will typically be determined when you lodge your tax return
  • The ATO will calculate any compulsory repayment based on your taxable income
  • Voluntary repayments can be made at any time throughout the year
  • Your employer won’t automatically withhold HELP repayments unless you’ve arranged it

Should You Update Your Tax Withholding?

With the higher threshold, many people may find they’ve been having too much tax withheld from their pay for HELP repayments. We can help you review your withholding arrangements to ensure you’re not unnecessarily reducing your take-home pay.

Planning Strategies for Managing Student Debt

After four decades of helping Newcastle families and young professionals with their finances, here are my practical tips:

1. Review your current HELP debt balance Log into your myGov account and check your ATO portal to see your current student loan balance.

2. Understand your total debt reduction Use the HELP debt calculator or call us to work out exactly how much you’ll save.

3. Consider voluntary repayments strategically With the 20% reduction coming, it might make sense to wait until after it’s applied before making large voluntary repayments. We can help you strategise timing.

4. Update your budget The higher repayment threshold means more disposable income. Whether you use this for savings, paying down other debts, or building your emergency fund, having a plan is crucial.

5. Don’t ignore indexation While you’re paying less overall, your remaining HELP debt will still be indexed to inflation each year. Understanding how this impacts your long-term repayment can inform your strategy.

How TSP Can Help with Your Student Debt Planning

Managing student loans alongside tax planning, budgeting for your first home, and building your financial future requires a holistic approach. At TSP, we’ve been helping young Australians in Newcastle and the Hunter Valley navigate these decisions for over 42 years.

We can help you:

  • Calculate your exact HELP debt reduction
  • Review your tax withholding arrangements
  • Develop strategies to pay down student debt efficiently
  • Plan for major financial goals while managing student loans
  • Optimise your tax return to maximise your refund or minimise debt

Whether you’re a recent graduate, carrying VET student loans, or managing HELP debt while building your career, we’re here to help you make smart financial decisions.

Take Action on Your Student Debt

The 20% reduction and new repayment thresholds are significant wins for anyone carrying student debt, but understanding how they apply to your specific situation is where the real value lies.

Don’t leave money on the table or miss opportunities to optimise your financial position. Give us a call on 4926 4155 or email ad***@****************om.au to discuss your student loan strategy.

After all, we’ve been helping Newcastle navigate their finances since 1983—we know what works, and we’re here to help you make the most of these changes.

TSP Accountants & Business Advisors has been serving Newcastle and the Hunter Valley for 42 years. We specialise in taxation, compliance, business advisory, and helping young Australians build strong financial futures. Contact us at 4926 4155 or ad***@****************om.au.

Common Questions About the Student Debt Changes

Do I need to apply for the 20% HELP debt reduction?

No, it’s completely automatic. The ATO will process it and notify you.

Will this affect my credit score?

HELP debts don’t appear on credit reports and don’t affect your credit score. However, lenders do consider HELP debt when assessing your borrowing capacity for home loans.

Should I keep making voluntary repayments?

It depends on your financial situation. Paying down HELP debt reduces the impact of indexation and can improve your borrowing capacity, but you might get better returns paying off higher-interest debts first or building savings.

When will I see the reduction in my account?

The Government has indicated the reduction will be applied retrospectively. Keep an eye on your ATO account and you’ll be notified once it’s processed.

Deidre Molloy | BCom, CA
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