Are you one of the 3 million Australians with student debt?

On average it takes 9.5 years to repay a HECS- HELP debt.

The government is providing assistance with this debt - lower balances, smaller repayments, and greater borrowing power — all explained below.

In July, the federal Parliament passed legislation to cut student loan balances by 20%. If you had an outstanding HELP or other student loan debt balance as at 1 June 2025, the Government will reduce your outstanding debt by 20%.

On 1 June 2025, indexation of 3.2% was applied in the normal way to all student debt, so the indexation (basically interest on your loan) will also be reduced by 20%. 

The current average HELP debt is $27,600, so based on this amount will see a $5,520 reduction in the balance owed. Backdated to June 1, this initiative impacts all HELP, VET Loans, Australian Apprenticeship Support Loans, Student Startup Loans, and other student loans.

Future repayment relief

In addition, the income threshold for debt repayments has been raised from $54,435 to $67,000. Under the previous system, your repayment rate was applied to your entire taxable income above the old threshold. The new system calculates compulsory repayments only on income above A$67,000, transforming how much extra you’re required to pay.

For someone earning $70,000 this will reduce their minimum student debt repayments by $1,300 a year.

Instead of fixed percentages applied to broad income bands,repayments now follow a marginal rate scale:

• Below     $67,000: 0%
• $67,001–$124,999:     15 % dollar over     $67,000
• Above     $125,000: base amount plus 17% over $125,000

Student Loan Treatment by Lenders

Another change to student loans is that many lenders arechanging the way student debt is assessed in home loan applications. NAB has just announced that from July 31, if you owe $20,000 or less in student debt,it won't affect their borrowing capacity for a mortgage. CBA excludes HELP debt from homeloan servicing calculations for borrowers who can repay their HELP debt within12 months.

This can boost borrowing power, helping lenders get into theproperty market sooner or buy a home that better suits their needs.

You can find out how much your outstanding HELP debt will bereduced by using the calculator below:

HELPdebt reduction and repayment estimators - Department of Education, AustralianGovernment

Should I Pay Off My HELP Debt Early — Or Hold onto It?

If you're wondering whether to pay off your student debt sooner or use that money elsewhere — you’re not alone. It’s a common question, especially for those focused on building wealth or improving their borrowing power.

While I can’t provide personal financial advice, here are some key considerations to help you weigh the options.

First, Understand How HELP Debt Works

HELP debts (and similar student loans like VET and SA-HELP) don’t attract interest in the traditional sense, but they are indexed eachyear in line with inflation (CPI).

• In 2025, the indexation rate was 3.2%.
• This means your debt grows by 3.2% annually unless you’re actively repaying it.
• Unlike other debts, HELP repayments are automatically deducted from your income once you earn above a certain threshold (now $67,000 from July 2025).

The Case for Not Paying It Off Early

1. Low-Cost Debt:
       It’s one of the cheapest loans you’ll ever have (when inflation is low!) - no interest, just CPI-based indexation.
2. No Impact on Credit Score:
       HELP debt isn’t shown on your credit file. It doesn’t hurt your score like missed repayments on other loans.
3. Use Funds for Higher Returns:
       If you can invest your money elsewhere and earn more than 3.2% post-tax, this could be a better long-term wealth strategy.
4. Optional Repayment Timing:
       You're not required to make extra repayments. Only a portion of your income over the threshold is used — giving you flexibility.

When Paying It Off Early Might Make Sense

1. Boost Your Borrowing Power:
   Some lenders factor HELP debt into your serviceability — especially if you're close to your borrowing limit for a mortgage.  Although this is set to change, as discussed above.
2. Improves Cash Flow in the Long Run:
       Eliminating the debt means your mandatory repayments stop, freeing up your future income for saving or investing.
3. Peace of Mind:
       For many, being debt-free just feels better. If your HELP balance weighs on your mind, that’s a valid reason to clear it.
4. Fewer Surprises from Indexation:
       As we’ve seen in recent years, inflation can spike unexpectedly — and with it, so can HELP indexation/ interest on your loan.

So, baring all of this in mind, if you have surplus funds, ask yourself:

'Can I put this money to better use elsewhere — earning more than 3.2% per year after tax?'

If the answer is yes, you may consider investing instead. If no (or if you simply want the mental clarity of being debt-free), repaying early could be the better path for you.

If this topic is something you're currently weighing up, it might be worth talking to a licensed financial adviser/ coach or mortgage broker to look at the numbers for your personal situation.

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