If you have a Higher Education Loan Program (HELP) debt, recent proposals by the government could significantly affect your repayments. These changes, subject to legislation, are planned to take effect from 1 June 2025.

Here’s a breakdown of the key proposed changes:

A One-Time 20% Reduction in HELP Debts

A 20% reduction on all HELP debts is proposed to occur before the usual annual indexation in June 2025. This adjustment will be applied automatically by the ATO.

For instance, if your current HELP debt is $27,600, you could see it reduced by approximately $5,520.

Increased Income Threshold for Repayments

From 1 July 2025, the minimum income required to begin making compulsory HELP repayments is set to rise from$54,435 to $67,000. This change allows you to hold onto more of your income before repayments start.

Once your income exceeds $67,000, repayments will be calculated based on the amount over that threshold, using the following proposed rates:

• Below $67,000: No payment required
• $67,001 – $124,999: 15 cents per dollar over $67,000
• $125,000+: $8,700 plus 17 cents for every dollar over $125,000

Capping of HELP Indexation Rates

The indexation rate for HELP debts would be capped at the lower of either the Consumer Price Index (CPI) or the Wage Price Index (WPI). Importantly, this adjustment would be backdated to 1 June 2023.

If your HELP debt was indexed using CPI in 2023 or 2024, the ATO will reassess your account to apply the lower indexation rate. This could even result in a refund if your balance is adjusted below zero.

What Does This Mean for You?

These proposed changes aim to ease the financial burden of HELP debt by reducing balances and delaying repayments for lower and middle-income earners. Understanding these updates can help you better plan your finances and manage your obligations as the changes take effect.