What’s happening and when
The Government has legislated (or is in the process of finalising) a major change to the treatment of student debt via the HELP system (which includes HECS-HELP). Broadly speaking:
- The annual indexation of HELP debts will now be based on the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI).
- In addition, the Government is applying a one-off 20% reduction on outstanding HELP debt as at 1 June 2025 (before indexation).
- The changes are being applied automatically by the Australian Taxation Office (ATO); you are not required to lodge extra forms or make a special application.
- Many people will see the adjustment (whether credit or refund) this November (for many) and for all by around mid-January.
How the calculation works
Here’s a simplified step-by-step of how your student debt balance will be adjusted:
- Determine your loan amount outstanding as at 1 June 2025, before any indexation for that date.
- Apply a 20% reduction to that amount (i.e., you reduce your debt by 20%).
- On the reduced balance, apply indexation at the lower of CPI or WPI (rather than applying the old, higher CPI-only indexation).
- If you still have debt, the credit simply reduces your outstanding balance. If you had fully paid off your debt already, a refund may be paid to you (provided there are no other Commonwealth debts).
Example: Suppose you had a HELP debt of $30,000 as at 1 June 2025 (pre-indexation).
- Apply 20% reduction: $30,000 × 20% = $6,000; so new balance = $24,000.
- Then apply indexation (say the lower of CPI/WPI is 4.0%): $24,000 × 4% = $960. So your adjusted debt = $24,960.
This contrasts with the “old” approach which might have applied 7% indexation on the original $30,000 leading to a much higher balance.
What you need to do
Very little. Here are the steps & checks:
- You do not need to lodge a special form or ask for the reduction/credit/refund. The ATO will apply it automatically.
- Make sure your bank account details with the ATO are up to date — if you are due a refund and you have no other Commonwealth tax/loan debts, it will be deposited into the account the ATO has on file.
- Monitor your loan balance in your myGov account (linked to the ATO) to confirm the adjustment has been applied.
- If you have repaid your HELP/HECS debt completely already, check whether you’re due a refund (see next section).
- If you still have a debt, note that the reduction will reduce your future compulsory repayments (since the debt base is smaller) and also the indexation impact is lower.
What if you paid off your debt just before the “cut-off”
One of the common questions: “What if I finished paying my HELP debt just before 1 June 2025 (or shortly after)?” Here’s how it works:
- The key date is your outstanding debt as at 1 June 2025, before indexation. If you had nil debt on that date (i.e., you paid it off earlier), you won’t get the 20% reduction because there was no balance to reduce.
- If you paid it off after 1 June 2025, but you had a balance on 1 June 2025, you may still receive a credit (or if your account is in credit now, a refund) because you were “in the system” on that cut-off date.
- If you are due a refund (because debt is nil now and you had a cut-off balance), the refund will be processed automatically by the ATO — provided you don’t owe other Commonwealth debts. You don’t need to apply.
- If you paid off your debt just before 1 June, but the balance was still non-zero on that date (because the repayment cleared after 1 June), you should still be eligible for the benefit. It’s the balance as at that date that counts.
Final thoughts
If you’re a client of Funded Futures Financial Services who either has or had a HECS/HELP debt, this is welcome news. It means:
- A one-off reduction of 20% in outstanding debt as at 1 June 2025
- Lower future repayments and lower indexation impact
- No action required from you (besides updating your bank account details and monitoring)
- If you’ve already paid off your debt: you might get a refund — check via your myGov/ATO account
