You may have seen headlines about the Albanese Government’s promise to slash student debt by 20%—welcome news to many doctors and medical professionals still carrying HECS-HELP balances. But what’s actually happening, and how does it affect your financial plans today?
Let’s break it down.
Has the 20% reduction happened yet?
Not yet. But it is coming. The government has committed to delivering this reduction, and Prime Minister Anthony Albanese has confirmed it will be the first piece of legislation introduced when Parliament resumes on July 22.
Why hasn’t it happened already?
Like many changes to government policy, this measure needs to pass through legislation before it can be implemented. While the announcement has been made, the reduction won’t take effect until the laws are formally passed.
What about HECS-HELP indexation this year?
As of 1 June 2025, student debts will rise by 3.2% due to annual indexation. However, once the 20% reduction legislation passes, the government has stated that the discount will be backdated to June 1, before the indexation is applied. After that, the indexation will be recalculated based on the lower debt amount.
Why is this process so drawn out?
This approach is consistent with previous changes to the HECS-HELP system—like the 2024 update that changed indexation to the lower of Consumer Price Index or Wage Price Index. Although proposed in May 2024, that change didn’t come into effect until legislation passed later in the year. Most people were notified via a government-issued text in November/December that their debts had been retrospectively adjusted.
What does this mean in real terms?
For example, someone with a $70,000 HECS-HELP debt on 1 June 2025 and an Adjusted Taxable Income (ATI) of $125,000 for the 2024/25 financial year will see their debt indexed by 3.2%. Once the legislation is passed, a 20% reduction will be applied retroactively, followed by a recalculation of the indexation based on the reduced balance.
What if you lodge your tax return before the legislation passes?
If you lodge early, you won’t receive a refund where you still have a HECS-HELP debt – but your HECS-HELP balance will be credited accordingly once the change comes into effect. If you pay off your HECS-HELP debt in full after 1 June 2025 and before the reduction is applied, the government will be looking to refund the overpayment.
How does this affect borrowing capacity?
For those nearing the end of their HECS-HELP debt, it’s important to consider the impact on your financial profile. Clearing the debt entirely may improve your borrowing capacity, as lenders typically view lower ongoing obligations as positive when assessing loan applications.
Typically for an individual who no longer has HECS-HELP earning $160,000 is able to borrow $100,000 – $200,000 more depending on their circumstances.
So, what should you do?
If your HECS-HELP loan is nearing completion, or you are considering paying out your existing debt, we strongly recommend you speak with your financial advisor at Walshs first, as it may not be in your best interest to pay out your loan early.
Need clarity on your HECS-HELP situation?
We’re here to help you make the most informed financial decisions – especially as changes unfold. If you’re unsure how this affects your individual circumstances, reach out to your adviser HERE for personalised advice.
Contact us today to book a consultation and ensure you’re taking the smartest financial steps forward.
📞 07 3221 5677
🌐 www.walshs.com.au/book-a-meeting
✉️ enquiries@walshs.com.au
By Arin Doig, Walshs Financial Adviser
