By Kate Nguyen
From 24 September 2025, the ATO is introducing significant changes to how student loans (HECS-HELP, VET Student Loans, and other training loans) are managed.
These changes are designed to make repayment fairer, reduce the impact of inflation on outstanding debt, and provide greater flexibility for borrowers. Understanding these updates is essential for both employees and employers to ensure accurate repayment and compliance.
Student Loan Changes
- 20% Debt Reduction – The bill for reducing Higher Education Loan Program (HELP) or student loan debt by a one-off 20% on the balance as of 1 June 2025, before the application of the yearly indexation, has recently passed parliament. This makes HELP and student loan repayments fairer. It is also important to note that there is currently no exact date for when this reduction will hit the loan accounts.
- Fairer Indexation – Loan balances will now be indexed based on the lower of consumer price index (CPI) or Wage Price Index (WPI), reducing the impact of inflation.
- Higher Repayment Threshold – From the 2025–26 income year, compulsory repayments are calculated using marginal rates, with the minimum income threshold for compulsory repayments starting at $67,000 (up from previous years).
- Updated Tax Withholding – From 24 September 2025, new PAYG tax tables will apply for employees with study debts. Therefore, employers must update payroll systems to ensure it is accurately reflected.
What this means for you
- Check your updated loan balance via myGov after the reduction is applied.
- Where your study loan is in credit after the reduction, you may receive a refund for the excess amount to your nominated bank account if you have no outstanding tax or other government debts. To avoid any delays, if you’re expecting a refund after the 20% reduction, check your bank details are up to date.
- Employers and payroll providers should ensure they are using the ATO’s new tax tables from payment dates starting 24 September 2025.
Contact Us
For personalised guidance on how these changes may affect your study loans and repayments, contact your representative at DFK Benjamin King Money. We can help you navigate the updates and ensure your student loans are being managed correctly.
