HECS Debt Cut Passes Parliament

One of the Australian Labor Party’s key election promises for 2025 was to cut debt on HECS loans by 20 percent. This has now passed through the Senate with bipartisan support, making it the first piece of legislation passed by the 48th parliament of Australia. This change will assist 3 million Australians with repaying their debt.

This legislation also included a change to the repayment threshold, as those with a HECS debt are now able to earn up to $67,000 before the minimum repayment threshold kicks in, up from over $54,000. 

The Australian Taxation Office will now automatically apply the 20 percent debt reduction to each person according to the amount of debt accrued as of June 1st, 2025. This means that the debt is reduced before indexation comes into effect for the year, so your indexation will only apply to the reduced debt. No action is required; all debt holders will be notified of any changes made to their debt via myGov. 

If you’re wondering whether the debt changes will apply to those who have recently paid off their HECS debt, the answer is, unfortunately, no.

Student debt has become an important cost-of-living issue in recent years, with the average time needed to repay student debt gradually increasing over the past decade, according to statistics from the Australian Taxation Office.

While this debt relief is an important step, there is an argument that it doesn’t go far enough. A core issue in the student debt debate is the Job Ready Graduates Package implemented by the Morrison government in 2021. The package causes students studying humanities degrees to pay significantly higher fees compared to their counterparts in other faculties, despite the fact that many of these degrees typically lead to lower-paying jobs. This legislation remains thus far unchanged by the Albanese Labor government.

The question now remains as to whether this debt reduction will really create some financial relief for young working Australians, the answer to which is yet to be seen.