If you’re among the more than three million Australians with a student loan, there’s welcome news that could significantly lighten your financial load. The Australian Government’s legislation to reduce student loan debt by 20% is now being applied. The ATO applies the 20% reduction to your student debt balance as at 1 June 2025, before indexation was applied, with the 2025 indexation recalculated on the reduced debt amount.

You don’t need to take any action. Most people were due to receive their reduction before the end of 2025, and more complex reductions are being processed by the ATO in early 2026. The ATO will notify you via SMS, email or your myGov inbox when your reduction has been applied.

If your loan account is in credit after the reduction is applied, you may receive a refund – although, if you have outstanding tax or other Commonwealth debts, the ATO will apply your credit to these debts first.

Changes to Repayment Thresholds

From 1 July 2025, the minimum repayment income needed to make a compulsory repayment has increased to $67,000 for the 2025-26 income year. Compulsory repayments have also moved to a marginal repayment system, meaning they’re only calculated on the part of your income above $67,000 (instead of your total repayment income). This will reduce annual repayments for most people.

If your repayment income is $179,286 or more, your compulsory repayment will continue to be 10% of your total repayment income, meaning you won’t be worse off because of the shift to marginal rates.