Understanding the new 20% student loan reduction
The Australian government’s promise to cut student loan debts by 20% has now become law. If you’re one of more than three million Australians who have a student loan, you’re probably wondering what this means for you and when you’ll see the benefits.
The change applies to all types of student loans, including VET Student Loans, Australian Apprenticeship Support Loans, and even older schemes like the Student Financial Supplement Scheme.
If you had an outstanding student loan debt on 1 June 2025, you’re eligible. The reduction is calculated on your debt balance as at that date, before the annual indexation was applied. Even if you’ve made payments since June or completely paid off your loan after that date, you’ll still receive the full 20% reduction based on what you owed on 1 June.
If you’ve already paid off your loan since 1 June, the reduction might actually put your ATO account into credit, potentially resulting in a refund to your bank account (as long as you don’t have tax debts owing).
If you’d already paid off your student loan completely before 1 June 2025, unfortunately you won’t benefit from the 20% reduction. The relief only applies to debts that existed on that date.
The ATO’s responsible for applying the change, and is currently updating its systems to process these reductions. Most people should see their 20% reduction applied before the end of 2025.
You don’t need to do anything to receive the reduction – it will be applied automatically. The ATO will notify you when it’s been processed, and you’ll be able to see your new lower balance through your myGov account or the ATO app.
Don’t delay lodging your tax return while you wait for your changed loan balance to appear in your MyGov account. There’s no benefit in waiting, and you should continue with your normal tax obligations.
Remember to update your bank details with the ATO if you’re expecting a potential refund, and if your loan gets paid off completely, don’t forget to tell your employer to stop withholding additional amounts from your pay.
Please contact our office if you have any questions or queries - 03) 5571 0111

