Changes to the Higher Education Loan Program
Changes to the Higher Education Loan Program
The Government has announced changes to the Higher Education Loan Program (HELP) to cut a combined $19 billion in student debt for three million Australians. The Government will reduce student debt by 20% for all Australians who currently have a student debt and will increase the threshold at which individuals are required to start making repayments.
Currently, individuals are required to make repayments for the 2024-25 financial year when they earn $54,435 or more. The Government has announced the threshold will increase to $67,000 in the 2025-26 financial year.
An individual currently earning $80,000 annually with a current student debt of $35,000 will have their debt reduced to $28,000 before indexation with the 20% reduction. Under the Government’s proposed changes to the repayment system, this will reduce the compulsory repayment for the 2025-26 financial year to $1,950, saving the individual $850.
BDO comment
While this measure may, understandably, prove frustrating for those who have recently paid off their student loans, millions of young Australians will be welcoming this announcement. The one-off reduction in student loans will assist all young Australians to secure their financial futures because commercial lenders often take these amounts into consideration when assessing borrowing capacity. Additionally, the reduction in compulsory repayments is effectively a tax cut for those with HELP debts.
A better educated, more skilled, better off and thus more productive generation is something all of Australia stands to benefit from.