The Australian Government has proposed significant changes to the Higher Education Loan Program (HELP) that could impact millions of Australians with outstanding HELP debts. While these changes are subject to legislative approval, they are planned to take effect by 1 June 2025. Here’s what you need to know:
1. A One-Off 20% Debt Reduction
The government plans to introduce a one-time 20% reduction to all HELP debts. This reduction would automatically be applied by the ATO before the annual indexation on 1 June 2025.
For example, if your current HELP debt is $27,600, you could see a reduction of approximately $5,520, lowering your balance to $22,080.
2. Increased Income Threshold for Repayments
From 1 July 2025, the minimum income threshold for making compulsory HELP repayments is proposed to rise from $54,435 to $67,000. Under this change:
- No repayment is required for incomes below $67,000.
- For incomes between $67,001 and $124,999, the repayment rate will be 15 cents for each dollar above $67,000.
- For incomes above $125,000, repayments will be $8,700, plus 17 cents for each dollar over $125,000.
This change means repayments will be calculated on income above the threshold but at higher rates than the current system.
3. Capped HELP Indexation Rates
To address concerns about rapidly increasing HELP debts, the government proposes capping the indexation rate at the lower of either:
- The Consumer Price Index (CPI), or
- The Wage Price Index (WPI).
This adjustment will apply retrospectively to all existing HELP, VET Student Loans, and similar accounts from 1 June 2023. If your HELP debt was indexed using CPI in 2023 or 2024, the ATO will retroactively adjust your account to reflect the lower indexation rate. In some cases, this could result in a refund if the adjustment reduces your balance below zero.
How These Changes Could Affect You
These reforms aim to provide relief to HELP borrowers by reducing debts, raising the income threshold for repayments, and capping future indexation. Please note these changes are yet to be legislated.
If you’d like to discuss how these proposed changes could affect your circumstances, please don’t hesitate to contact our office.