In a massive win for students and graduates across Australia, the 2025 Federal Budget has unveiled a sweeping plan to reduce student loan debts by 20%. Valued at $16 billion, this one-time move is designed to relieve the pressure of rising student loan balances—especially after recent years of harsh indexation spikes.
If passed, the policy will reduce debts for around 3 million Australians as of June 1, 2025, just before the next round of indexation hits in August.
This update applies to those with HELP, VET Student Loans, Australian Apprenticeship Support Loans, and similar income-contingent loan accounts.
What Exactly Is Changing?
The federal government plans to wipe 20% off every eligible student debt—a budgeted $16 billion reduction in total loan obligations. This includes anyone with an existing loan in these categories:
- Higher Education Loan Program (HELP), formerly known as HECS
- VET Student Loans
- Australian Apprenticeship Support Loans
- Other income-contingent student loans
| Feature | Details |
|---|---|
| Reduction Amount | 20% of the total loan balance |
| Estimated Average Saving | $5,520 (based on average HELP debt of $27,600) |
| Total Cost to Government | $16 billion |
| Eligible Recipients | ~3 million Australians |
| Date of Implementation | June 1, 2025 |
| Indexation Cycle | Reduction comes before August 2025 indexation |
Why This Is a Game-Changer
1. Debt Relief After Years of Indexation Surges
Many students have seen their loans grow despite making repayments, due to annual indexation previously tied to inflation. For example, in 2023, some students saw their debt grow by over 7% in one year. This new plan reverses that trend, offering real and immediate debt relief.
2. Across-the-Board Eligibility
Unlike past relief efforts targeted at specific groups, this policy includes all HELP and similar loan holders—from university graduates to TAFE students and apprentices. If you’re holding any qualifying debt as of June 1, you’ll see a 20% reduction applied automatically.
3. Election-Linked Promise
This policy will be implemented only if the Labor government retains power in the upcoming federal election. If re-elected, the reduction will come before the next indexation increase in August, allowing borrowers to benefit instantly.
Example: How Much You’ll Save
| Your Current Debt | 20% Reduction | New Balance |
|---|---|---|
| $10,000 | $2,000 | $8,000 |
| $20,000 | $4,000 | $16,000 |
| $27,600 (Average) | $5,520 | $22,080 |
| $50,000 | $10,000 | $40,000 |
Will You Qualify?
You’ll be eligible for the 20% student debt wipeout if:
- You hold an active HELP, VET Loan, or Apprenticeship Loan balance.
- Your loan is active as of June 1, 2025.
- The Labor government wins the federal election.
No application is needed—the discount will be automatically applied before the next indexation hits.
The $5,520 average reduction in student debt marks a major shift in how Australia approaches higher education affordability.
With 3 million Australians set to benefit and $16 billion allocated, this plan could transform financial futures—reducing loan burdens and helping more young people get ahead.
As the federal election approaches, this proposal is likely to be a deciding factor for many voters. If implemented, it promises immediate and meaningful relief for every student with a HELP-related loan.
FAQs
Do I need to apply for the HECS/HELP debt reduction?
No. The 20% reduction will be automatically applied to all eligible student loans on June 1, 2025, before indexation.
Does this apply to future students?
No. Only those who hold student loan debt before June 1, 2025 will benefit. New loans taken out after this date will not be eligible.
Will this affect my repayment threshold or loan interest?
No. The repayment threshold remains separate. This is a one-time balance reduction, not a change to repayment rules or interest.