From today, millions of Australians with student loans will see extra cash in their pay packets thanks to major changes to the HECS-HELP repayment system. The federal government has simplified the rules, lifted the repayment threshold, and introduced a fairer marginal repayment scheme — meaning more money stays in your pocket.
What’s Changing With HECS Repayments?
The old system forced graduates to pay a fixed percentage of their entire income once they passed the repayment threshold. Now, repayments only apply to the portion of income above the new minimum threshold.
New Repayment Thresholds for 2025–26
- Below $67,000 – No repayments required
- $67,000 – $125,000 – 15 cents per dollar above $67,000
- $125,001 – $179,285 – $8,700 plus 17 cents per dollar above $125,000
- $179,286 and over – 10% of total repayment income
This new marginal system replaces the 19 confusing brackets under the old scheme. Employers will start withholding the updated rates from September 24, 2025.
How Much Will You Save?
The new system means lower repayments for most Australians:
- Someone earning $70,000: about $1,300 in savings per year (~$50 per fortnight)
- Someone earning $80,000: about $850 saved annually
- The average debt holder: expected to save around $680 per year
Those earning below $67,000 won’t need to make compulsory repayments at all. High-income earners ($179,286+) will continue paying the same rate.
Extra Boost: 20% Student Debt Reduction
On top of repayment changes, the government has announced a 20% cut to all student loan balances that existed on June 1, 2025 (before indexation).
- No action is needed — the ATO will apply the reduction automatically.
- Most cuts will be processed before the end of 2025.
- Students and graduates with loans could see thousands wiped off their debt instantly.
Why Is This Happening?
Treasurer Jim Chalmers said the reforms are about easing financial pressure:
“We’re slashing student debt to ease pressure on young people and we’re making repayments fairer to help with the cost of living.”
Education Minister Jason Clare added:
“This will put money back in the pockets of young people when they really need it.”
Quick Summary of HECS Changes
- ✅ Repayment threshold lifted to $67,000
- ✅ New marginal repayment system (fairer, simpler)
- ✅ Average debt holder saves ~$680 per year
- ✅ 20% loan balance reduction in 2025
- ✅ Employers already applying new withholding rates
FAQs
1. When do the new HECS repayment rules start?
The new rates apply from September 24, 2025, with savings reflected in future tax returns.
2. Do I need to apply for the 20% loan reduction?
No. The ATO will apply it automatically and notify you.
3. What if I earn under $67,000?
You won’t have to make compulsory repayments.
4. Will high earners benefit?
People earning over $179,286 will pay the same rate as before.
5. Does this mean my debt won’t grow with indexation?
Indexation still applies, but the 20% one-off reduction and lower repayments will ease the burden.
Final Thoughts
For millions of Australians, these HECS changes mean real savings and a lighter financial load. With the threshold lifted, repayments fairer, and student loans cut by 20%, graduates will finally get to keep more of their hard-earned money.