HECS-HELP Reforms 2025: Big Changes Every Graduate Needs to Know
- Future Accounting
- Aug 11
- 3 min read
Updated: Aug 15
Understand HECS-HELP reforms 2025: 20% debt cut, capped indexation, and fairer repayments
If you’re one of the 3 million Australians with a HECS-HELP debt, there’s some very welcome news coming your way. The HECS-HELP reforms 2025 are designed to cut student debt, reduce repayment pressure, and make the system fairer, especially for low- and middle-income earners.
Here’s a clear breakdown of what’s changing, when it’s happening, and how you can take advantage of these reforms to get ahead financially.
One-off 20% debt cut: a huge boost for graduates
Effective: 1 June 2025 (backdated)
The headline reform is a 20% reduction on all outstanding HECS-HELP debts as of 1 June 2025. This one-off cut will be applied before indexation, wiping around $16 billion from the national student debt pool.
For the average graduate with a debt of about $27,600, that’s roughly $5,500 wiped instantly - and it happens automatically. There’s no need to apply; the Australian Taxation Office (ATO) will make the adjustment once the legislation is passed.
Indexation cap: Slowing the growth of your debt
Effective: Applied since 1 June 2023, ongoing
The days of steep indexation hikes are over. Under the HECS-HELP reforms 2025, student loan indexation is capped at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI).
This cap brought the 2025 indexation rate down to 3.2%, delivering an estimated $3 billion in relief. Importantly, this change applies retrospectively from 1 June 2023, giving past indexation some welcome corrections.
Fairer repayments: Higher threshold and marginal rates
Effective: 1 July 2025 (FY 2025–26)
Another big win for graduates is a fairer repayment system. The minimum income threshold for compulsory HECS-HELP repayments will rise from $54,435 to $67,000.
Plus, repayments will switch to a marginal system - so you’ll only pay a percentage on the income above the threshold (like how income tax works), rather than on your entire salary.
Here’s the new structure:
Up to $67,000: No repayments
$67,001 – $124,999: 15% of income above $67,000
+$125,000: $8,700 plus 17% of income above $125,000
For someone earning $70,000, this translates to around $1,300 in annual savings.
Why these HECS-HELP reforms 2025 matter for you
Younger borrowers benefit most. Around 70% of HECS-HELP debt holders are under 35 - so these changes offer massive relief early in your career.
It boosts borrowing power. Lower student debt improves your ability to get finance, making it easier to take that next step, like buying your first home.
It leaves more money in your pocket. With the repayment threshold jumping and fairer rates introduced, you’ll feel less financial pressure while building your career.
What you should do to make the most of the reforms
Wait before making voluntary repayments. It should not make any difference given 1 June 2025 has now passed but hold off making any prepayments until after the reduction applies.
Check your MyGov and ATO accounts. Once the legislation passes, adjustments will be made automatically.
Plan ahead for the new repayment system. Use the updated thresholds and rates to budget smarter for the 2025–26 financial year.
What this means for your finances
These reforms are part of a broader push by the Federal Government to tackle cost-of-living pressures. While some economists argue that a one-off debt cut benefits higher-income professionals the most, the HECS-HELP reforms 2025 are still a game-changing structural shift in how student debt is managed in Australia.
For most graduates, it means lower debt, fairer repayments, and more financial breathing room.
Want to know how the HECS-HELP reforms 2025 could improve your financial future?
At Future Accounting, we specialise in helping graduates, professionals, and families make the most of opportunities like this.
Book an appointment with us today, and let’s create a tailored plan to get you ahead - whether it’s reducing debt faster, boosting your borrowing capacity, or planning for your next big financial goal.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
