This guide is general information only and is not tax, financial or legal advice. Individual circumstances vary. Speak to a registered tax agent before acting.
Two big changes hit student loans in 2025, and both flow through to your 2026 tax position. First, the government applied a one-off 20% cut to every HELP and study loan balance. Second, the way compulsory repayments are worked out changed to a marginal system with a higher starting threshold. Together these changes affected more than 3 million Australians and removed over $16 billion in debt. This guide explains both changes and shows the current repayment thresholds and rates.
The 20% debt reduction
The government reduced all outstanding HELP and study loan balances by 20%. The cut was calculated on the balance as it stood at 1 June 2025, before that year's indexation was added, and indexation was then recalculated on the smaller balance.
It was automatic. Nobody had to apply, lodge a form or contact the ATO.
The reduction covered HECS-HELP, FEE-HELP, VET Student Loans, Australian Apprenticeship Support Loans and other study and training support loans. Across everyone affected it removed over $16 billion of debt for more than 3 million people, and around 70% of people repaying a HELP debt are aged 35 or younger.
Example: a balance of $40,000 at 1 June 2025 was reduced by $8,000 to $32,000 before indexation. To confirm the reduction on your own account, log in to myGov and open ATO online services.
The new repayment system
The old system charged a flat percentage of your whole repayment income once you passed a single threshold. The new system works in bands, like income tax. You now repay only on the income above each threshold, not on your entire income. The starting threshold also rose.
For most people this means a lower compulsory repayment from their 2026 tax return onwards, and some people below the threshold no longer have a compulsory repayment at all. There is no change for people earning at or above the top threshold.
Current thresholds and rates (2026-27)
The thresholds are indexed each year, so they move upward over time. These are the figures for the 2026-27 financial year.
For reference, in 2025-26 the starting threshold was $67,000 and the top threshold was $179,286. The rates were the same, only the dollar thresholds were lower.
| Repayment income | Compulsory repayment |
|---|---|
| $0 to $69,528 | Nil |
| $69,529 to $129,717 | 15c for each $1 over $69,528 |
| $129,718 to $186,050 | $9,028 plus 17c for each $1 over $129,717 |
| $186,051 and over | 10% of total repayment income |
What counts as repayment income
Repayment income is more than your salary. It is your taxable income plus reportable fringe benefits, total net investment loss (which includes net rental losses), reportable super contributions and exempt foreign employment income. This is the figure the thresholds above are applied to.
Worked examples (2026-27)
These use repayment income, not salary alone.
Repayment income of $80,000: this sits in the first band. The repayment is 15% of the amount over $69,528, which is 15% of $10,472, or $1,570.80.
Repayment income of $100,000: still in the first band. The repayment is 15% of $30,472, or $4,570.80.
Repayment income of $140,000: this reaches the second band. The repayment is $9,028 plus 17% of the amount over $129,717, which is $9,028 plus 17% of $10,283, or $10,776.11.
The HECS Repayment calculator estimates your compulsory repayment for any income, using the current 2026-27 thresholds and rates.
Open the HECS Repayment CalculatorHow indexation works
A HELP debt does not charge interest. Instead the balance is indexed once a year on 1 June, and only on the part of the debt that has been held for more than 11 months. Since 2023 the indexation rate is the lower of the Consumer Price Index or the Wage Price Index, so the debt cannot grow faster than wages.
Because indexation applies on 1 June, a voluntary repayment made before that date reduces the balance that gets indexed that year. Whether a voluntary repayment suits your situation depends on your own circumstances, and this guide is general information only.
How to check your balance
Your current balance, the reduction and any indexation are all visible in myGov under ATO online services. Employers withhold amounts towards your loan through the year using the updated ATO tax tables, and any difference is reconciled when you lodge your return.
Sources and references
This article is general information only and does not constitute financial or tax advice. Individual circumstances vary. Please consult a registered tax agent before making any decisions based on this information.