The 20% HECS Debt Reduction Explained
The government cut eligible student loan balances by 20%. Here is who qualifies, how the cut interacted with 2025 indexation, and how to check your new balance.
By Timothy Hirou GaschereauPublished 9 min read
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The government wiped 20% off eligible student loan balances in a single, one-off move. If you had an outstanding HELP, VET Student Loan, or other eligible study debt on 1 June 2025, the reduction has already been applied to your account automatically. No form, no application, no hoops.
Here is exactly what the cut is, who it covers, and the timing detail that made it worth even more.
🎯 The essential: The Universities Accord (Cutting Student Debt by 20 Per Cent) legislation cut eligible study loan balances by 20%, based on the balance outstanding as at 1 June 2025. It covers the full range of HELP and study loans, not just HECS-HELP. Crucially, the ATO applied the cut before the 1 June 2025 indexation, so indexation was calculated on the smaller amount. It was automatic, is not taxable, and does not refund loans already paid off. This is general information, not personal advice.
What the 20% reduction is
The measure was a direct response to two painful years of indexation: HELP debts were indexed at 7.1% in 2023 (the highest in decades) and 4.7% in 2024, so many graduates watched their debt grow faster than they could repay it. The government estimated the cut would affect around 3 million Australians and remove roughly $16 billion in debt.
It is a one-off. It applies to your balance as at 1 June 2025 and will not repeat, but combined with the other recent reforms below, it marks a genuine shift in how HELP debt works.
Which loans it covers
This is not only a HECS-HELP cut. It covers all of the eligible study and training loans:
- HECS-HELP, FEE-HELP, and SA-HELP
- VET Student Loans (VSL)
- OS-HELP
- ABSTUDY Student Start-up Loan, Student Start-up Loan (SSL), and Trade Support Loans (TSL)
Eligibility is simple: you needed an outstanding balance on one or more of these as at 1 June 2025, and the 20% applies to your total eligible balance across loan types. If your balance was zero, there is nothing to reduce.
The crucial timing: cut first, then indexation
This is the part most worth reading carefully. HELP debts are indexed on 1 June each year. For 2025 the ATO applied the 20% reduction before that indexation:
- Take your balance as at 1 June 2025, before indexation.
- Reduce it by 20%.
- Apply the 2025 indexation (3.2%) to the reduced balance.
The order matters. If indexation had been applied first, the 20% would have come off a larger, already-inflated number. Doing the cut first meant you got the full benefit and indexation was charged on the smaller amount. The 3.2% rate itself was lower than recent years thanks to the CPI/WPI cap, covered below. Our HECS indexation guide explains that change.
It was automatic
You did not need to do anything: no form, no application, no phone call. The ATO applied the 20% reduction to all eligible accounts automatically, with processing starting from late 2025 and working through accounts progressively, so some people saw the update earlier than others. People who had finished studying typically see one reduction transaction; those still studying during the period may see several. The ATO notified affected people via their myGov inbox, and where an account ended up in credit (for example after earlier voluntary repayments), it issued a refund unless there were other Commonwealth debts to offset.
Worked example
Say your HELP balance on 1 June 2025 (before indexation) was $30,000:
| Balance before cut | After 20% cut | After 2025 indexation |
|---|---|---|
| $15,000 | $12,000 | $12,384 |
| $30,000 | $24,000 | $24,768 |
| $50,000 | $40,000 | $41,280 |
How to check it has been applied
- 1. Log in to myGov and link the ATO if you have not already.
- 2. Open ATO Online Services, then Tax, then Accounts, then Loan accounts.
- 3. Your current balance and account history should show the reduction transaction.
- 4. If it does not appear, check your myGov inbox for an ATO message, or call the ATO.
For a full walkthrough of reading your loan account, see how to check your HECS debt balance.
The full picture: three changes together
The 20% cut does not stand alone. Three reforms have reshaped HELP debt, and together they change the maths:
- Lower indexation. Since 1 June 2023 (applied retrospectively), indexation is capped at the lower of CPI or the Wage Price Index, which is why the punishing 7.1% of 2023 was recalculated.
- The 20% one-off cut, applied to balances as at 1 June 2025 before indexation.
- A new repayment system for 2025-26: the threshold rose to $67,000, and repayments are now marginal, charged only on income above the threshold rather than your whole income once you cross it.
On an income of $75,000, for instance, your compulsory repayment is now worked out on the $8,000 above the threshold, not the full $75,000. See how HECS repayments actually work and whether to pay HECS off early for the repayment side.
Frequently asked questions
Who is eligible for the 20% HECS reduction?
+
Anyone with an outstanding balance on an eligible study or training loan as at 1 June 2025. Eligible loans include HECS-HELP, FEE-HELP, VET Student Loans, OS-HELP, SA-HELP, ABSTUDY SSL, Student Start-up Loans, and Trade Support Loans. There is no income test and no application process.
Do I need to apply for the 20% reduction?
+
No. The ATO applied the 20% cut to all eligible accounts automatically, with no form, call, or action needed. It should already appear in your loan account in myGov. If it does not, contact the ATO.
Was the reduction applied before or after 1 June 2025 indexation?
+
Before. The ATO reduced your 1 June 2025 balance by 20% first, then calculated the 2025 indexation on the smaller amount. That means you got the full benefit of the cut, and the indexation charge was smaller because it applied to a lower balance.
Is the 20% reduction taxable?
+
No. The reduction is a debt write-down, not income. You do not declare it in your tax return, and it has no effect on your assessable income or tax liability.
What if I already paid off my HELP debt before 1 June 2025?
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If your balance was zero on 1 June 2025, there is nothing to reduce and no refund applies. The measure only reduces outstanding balances on that date.
How do I check my updated HELP balance?
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Log in to myGov, open ATO Online Services, then go to Tax, Accounts, Loan accounts. Your updated balance and the reduction transaction should be visible. You can also call the ATO or visit StudyAssist for more information.
How does the 20% cut interact with the new indexation rules?
+
They work together. The CPI/WPI indexation cap (since 1 June 2023) means your debt grows more slowly going forward, the 20% cut reduced your starting balance before the 2025 indexation, and the new marginal repayment system from 2025-26 lowers compulsory repayments. Together they meaningfully reduce the cost of holding HELP debt.
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Sources
- ATO, study and training loans: what's new
- ATO, study and training loan indexation rates
- StudyAssist, 20% HELP debt reduction legislation
- myGov sign in
General information only, not personal financial or tax advice. It does not take your circumstances into account, and figures such as indexation rates change. Check current ATO guidance and consider a registered tax agent for your situation.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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