The big change coming to your HECS balance
The student loan balances held by roughly three million Australians will rise by 3.2% on Sunday as the latest round of indexation takes effect.
Each year on June 1 indexation is applied by the Australian Taxation Office (ATO) to outstanding student loans, including the likes of HECS-HELP debt and other schemes.
Indexation has traditionally been calculated in line with the Consumer Price Index, but the federal government amended the calculation last year after two contentiously-high increases in 2023 and 2024.
As a result of the change, the indexation rate is now based on the lower of the Consumer Price Index or the Wage Price Index.
On the average HECS-HELP debt of $27,600 the latest 3.2% indexation rate will add $883 to that balance, bringing it to a new total of $28,483.
As the table below shows though, the impact will differ depending on each individuals' level of debt.
While any increase is unlikely to be welcomed by current or former students, the downside of the latest rise may be offset - to some degree - by the prospect of debt relief to come.
Last November the federal government announced that, if re-elected, it would seek to slash student debt by 20% across the board.
So with the 2025 federal election now behind us and the Labor government re-elected, when is the debt reduction actually going to kick in? And who will benefit?
While all the details aren't crystal clear at present, here's what we do and don't know about those questions and more.
When will Labor's 20% student debt cut take effect?
After its election victory the government announced that one of its first priorities would be to implement its promise to cut student debt by 20%.
The change will need to be legislated though. And with the new parliament not due to sit until the end of July, that could take some time.
However, education minister Jason Clare confirmed to SBS earlier this week that once legislation is passed, debt relief will be backdated to June 1.
Who will qualify for debt relief?
Australians with debt accrued through schemes like the Australian Apprenticeship Support Loan, HECS-HELP, VET Student Loans and a range of others will be eligible for the 20% relief.
That's irrespective of how large or small their balance is - as long as it exists on June 1, 2025. So people who have paid off their debt before June 1 won't be eligible.
How much will students save?
Going back to someone with the average HECS-HELP balance of $27,600, a 20% reduction will result in their debt being cut by $5520.
Again, there's a wide variety of balances out there though. So Australians with student debt can get an idea of the relief they may receive by using the government's debt reduction and repayment calculator.
Will the cut be applied automatically?
Yes, the government has confirmed that - if legislated - the reduction will be applied automatically by the ATO. So people won't need to do anything themselves.
How will indexation and debt relief work together?
The government has confirmed that student debt relief will be backdated to June 1 and applied to balances before indexation.
In short, this means that people with outstanding debt won't be impacted in quite as much by this years' indexation rate.
It also mean that the ATO will need to adjust the indexation already applied to balances down the track.
Is it worth waiting until after June 1 to pay off debt?
In previous years' some people with debt have chosen to pay off their remaining balances before June 1 in order to avoid indexation.
The government itself notes that while everyone's situation will be different and that financial advice may be worth seeking, it may also be worth weighing up the potential benefits of the 20% reduction when making a decision.
Looking for other ways to tackle your balance? Check out our piece outlining seven ways to minimise your HECS-HELP debt.
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