If you're one of the millions of Australians with a Higher Education Loan Program (HELP) debt, you might be wondering how the government's proposed changes to HELP loans could affect you. While these changes are subject to the passage of legislation, they are proposed to take effect by 1 June 2025. 

One of the most significant aspects of the proposed changes is a one-off 20% reduction in all HELP debts. This reduction would be automatically applied by the ATO before the annual indexation on 1 June 2025. For example, if you have a HELP balance of $27,600, you could expect a reduction of approximately $5,520 in your debt. 

From 1 July 2025, the minimum income threshold for making compulsory HELP repayments is proposed to increase from $54,435 to $67,000. This means you’ll only start repaying your HELP debt once your income exceeds $67,000. The new repayments will be calculated only on the income above this threshold, but the rates will be higher compared to the current system. Here are the proposed new marginal repayment rates: 

• income below $67,000: no repayment required. 
• income between $67,001 and $124,999: 15 cents for each dollar over $67,000 
• income above $125,000: $8,700, plus 17 cents for each dollar over $125,000. 

Another crucial change is the proposed capping of the HELP indexation rate. Once the legislation is passed, the indexation rate will be set at the lower of either the consumer price index (CPI) or the wage price index (WPI). This adjustment will be backdated on all existing HELP, VET student loans, and other similar accounts from 1 June 2023. As a result, if your HELP balance was indexed based on the CPI in 2023 and 2024, the ATO will adjust your account to reflect the lower indexation, potentially providing a refund if your balance falls below zero. 

If you would like more information on this topic, please contact our office on 03 5571 0111.