The financial pressures of higher education in Australia are a reality faced by countless students and graduates. With the rising cost of living and stagnant wages, the prospect of repaying HECS (Higher Education Contribution Scheme) and HELP (Higher Education Loan Program) debts can feel daunting. Recognising this, the federal government is offering a new round of HECS debt relief, bringing much-needed hope to many.
In this article, we’ll explore the state of student loans in Australia, the pressing need for relief, and the government’s new approach to easing this burden.
The Rising Burden of Student Debt in Australia
Higher education in Australia has long been seen as an investment in the future, with HECS and HELP loans enabling students to access quality education without upfront fees. While this system has empowered many, the accumulation of student debts has reached concerning levels. As of 2025, experts have estimated the average student debt in Australia to be at least $27,500, and for some graduates, the debt stretches well beyond this figure. When it comes to the time it takes to repay everything, graduates think they might accomplish it over eight years.
The issue is compounded by indexation. Each year, unpaid HECS and HELP debts are adjusted in line with the Consumer Price Index (CPI), which rose sharply in recent years. For graduates earning lower incomes, this adjustment means their debts grow faster than they can repay, creating a cycle of financial stress.
The Need for HECS Debt Relief
The need for HECS debt relief is evident. Many graduates face years of financial insecurity, unable to save for homes, start families, or invest in their futures due to the weight of their student loans. This financial strain has broader economic implications, as it can stifle consumer spending and delay wealth generation for young Australians.
Moreover, the repayment threshold — the income level at which graduates must begin repaying their HECS or HELP loans — has historically been low. Until recently, graduates earning just over $48,000 annually were required to make repayments, a figure critics argued was unfairly burdensome for low to middle-income earners.
Federal Government’s New Plans for HECS Relief
In response to growing public concern, the federal government announced on 2 November 2024 that it is tabling legislation for new HECS debt relief measures to be made effective 1 July 2025, subject to the current administration remaining in office after the upcoming general elections. These include the following.
Raising the Minimum Repayment Threshold
One of the most significant changes is the plan to increase the minimum repayment threshold from the current $54,435 to $67,000. The new number was based on recent ABS analysis finding that it represents 75 percent of a higher education graduate’s average gross pay.
This adjustment acknowledges the rising cost of living and allows graduates to retain more of their income before repaying their student loans. For many, this may provide breathing room to focus on immediate financial priorities.
For the $67,000-$124,999 income bracket, the marginal rate of payment is set at $0.15 to each dollar over $67,000. However, if you are earning at least $125,000, that rate goes up to $8,500 plus $0.17 above $125,000. The ATO will assess the level of repayment for graduates in those two categories.
One-time Relief
The government is also building the idea of a one-time relief for student loans by as much as 20 per cent, covering three million Australians for a total projected relief of $16 billion. The draft measure will cover students who were granted HELP assistance along with others who applied for loans from Vocational Education and Training (VET) Student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans, and the Student Financial Supplement Scheme.
Pending the passage of associated legislation, the ATO will apply this relief to a person’s HELP loan balance ahead of indexation on 1 June 2025. However, this relief will only apply to people whose HELP loan balances are under $180,000.
Changing the Indexation Rate Calculations
The calculations to the indexation rate is to be adjusted to the lower consumer price index. This will be applied to all student loans made as of 1 June 2023, and avoid the 7.1 per cent hike from that year.
Benefits of the Proposed HECS Relief Measures
These reforms are expected to yield several benefits:
- Improved Financial Stability – Graduates will have greater financial flexibility, enabling them to manage living expenses, save, and invest without the constant pressure of student loan repayments. Speaking to NewsCorp Australia, H&R Block Australia tax communications director Mark Chapman said the potential of a lower CPI rating and higher repayment thresholds is an adequate space to save more money for the repayment, even with a possibly lower balance.
- Economic Growth – By reducing financial stress, these measures may stimulate consumer spending and economic participation among young Australians. Education Minister Jason Clare said to Sky News Australia that the relief can benefit fresh graduates who are just starting their careers.
- Incentivised Workforce Participation – Higher thresholds and targeted forgiveness programs could encourage greater workforce participation, particularly in critical sectors.
Challenges of the Proposed HECS Debt Relief
While the proposed HECS debt relief measures are a step in the right direction, they are not without challenges:
- Fiscal Impact – Critics argue that these measures could strain the federal budget, requiring careful planning to ensure economic sustainability. Shadow foreign spokesperson Simon Birmingham claims that the move is an election ploy in disguise and asked where the government will source the funds for the relief.
- Equity Concerns – Some believe the reforms may disproportionately benefit certain groups, such as high earners or those in specific professions, potentially neglecting others with equally pressing financial needs.
- Implementation Delays – With 2025 as the target year for several measures, some graduates may feel the relief is too slow to address their immediate challenges.
Managing HECS and HELP Debts: Steps for Graduates
As these reforms take shape, graduates can take proactive steps to manage their HECS and HELP debts:
- Stay Informed – Keep track of updates on HECS debt relief policies to understand how they may apply to your situation.
- Review Your Finances – Create a budget to prioritise essential expenses and savings. Use the breathing room provided by higher thresholds to strengthen your financial foundation.
- Explore Career Opportunities – Consider roles in high-demand sectors that may qualify for debt forgiveness programs.
- Pay Voluntarily If Feasible – If your financial situation allows, consider making voluntary repayments to reduce your debt balance and limit the impact of indexation. This may be critical to graduates who fall under the minimal repayment threshold but have sufficient money at hand for repayments.
Conclusion
Some people think that the best inheritance your parents can leave you behind is the chance for you to set your own path through a good education.
The federal government’s plans for HECS debt relief in 2025 mark a pivotal shift in addressing the financial challenges faced by Australian graduates. While there are hurdles to overcome, these reforms signal a commitment to easing the burden of student loans and empowering young Australians to build secure financial futures. Skills and Training Minister, Andrew Giles.
The objection of the proposed measures is to make higher education more accessible and its financial aftermath more manageable. As these changes unfold, they hold the promise of a brighter future for graduates, free from the overwhelming weight of student debts.
DISCLAIMER: This article is for informational purposes only and does not constitute official education finance advice, and is also subject to the passage of government legislation. QUICKLE has no working relationships with the federal government and is not a party to the development of any HECS relief measures. Please consult your tax agent and your higher education institution’s finance office about the status of your loans.
If you or a loved one are experiencing distress from finance issues due to student loan repayments, please contact the National Debt Helpline on 1800 007 007 from 9:30AM to 4:30PM every weekday.
