The Australian government has approved a 20% reduction in HECS debts, delivering one of the largest cost-of-living relief measures in recent years. The reform, which will apply automatically to eligible loans, is expected to benefit around 3 million Australians, including students, apprentices, and vocational trainees.
The move is part of a broader effort to tackle student debt and inflation pressures. By backdating the cut to June 1, the government ensures immediate relief for borrowers and offsets the recent loan indexation that has added hundreds of dollars to individual balances.
How the 20% HECS Reduction Will Be Applied
The legislation applies to HECS-HELP, VET Student Loans, Australian Apprenticeship Support Loans, and Student Start-up Loans. Borrowers with an average loan of $27,600 will see about $5,520 deducted from their balances.
The Australian Taxation Office (ATO) confirmed it will implement the change automatically, requiring no application from borrowers. The adjustment will appear in loan accounts over the coming months once the ATO finalizes system updates.
A Response to Rising Indexation
This relief measure was introduced in response to the 3.2% indexation rate applied to student loans earlier this year, which added around $882 to an average loan. By applying the 20% reduction first, the government effectively cancels out this increase for many borrowers.
Education Minister Jason Clare described the reform as “a significant step to help Australians manage their debts and ease cost-of-living pressures,” highlighting the immediate impact it will have on millions of households. The legislation passed through both the House of Representatives and the Senate with bipartisan support.
Senior opposition figures, including Susan Ley and Jonno Duniam, backed the measure despite some resistance from One Nation senators Malcolm Roberts, Warwick Stacey, and Tyron Whitten, who criticized the potential budget impact. The broad political backing allowed the bill to move swiftly through parliament, reflecting the urgency of addressing student debt.
Support for Tradies and Vocational Workers
The reform’s scope extends beyond university students. Workers with Vocational Education and Training (VET) loans and apprentices with support loans will also benefit from the 20% reduction. This measure is designed to support both higher education graduates and skilled workers essential to Australia’s economy.
The ATO indicated it is making extensive system modifications, including 50,000 lines of code, to ensure the changes are correctly applied. Alongside the debt cut, the legislation raises the HECS repayment threshold, allowing borrowers to retain more of their income before repayments begin. This adjustment is aimed at providing additional financial relief, especially for low- and middle-income earners, who have been disproportionately affected by rising living costs.
