How to make the most of your HECS-HELP refund

A year on from the government's proposal to reduce all HECS-HELP balances by 20%, millions of current and former students are beginning to see deductions applied.

"This is the biggest cut to student debt in Australian history," says Jason Clare, the minister for education.

"It means millions of young Australians will have thousands of dollars taken off their back."

The policy, which will see roughly $16 billion in debt wiped out, applies to Australians who had an outstanding HECS-HELP balance or other eligible debt on June 1, 2025.

On the average $27,600 balance the reduction will equate to $5520, though the department of education has a debt reduction calculator for those wanting to see how their own balance will change.

How are reductions being applied?

Reductions are being processed automatically by the Australian Taxation Office (ATO), meaning that those eligible won't need to apply.

Current and former students have been told to expect a text, email or a message in their myGov inbox from the ATO when the reduction has been applied, though people have been warned to update their contact information if it's out of date.

In terms of timing, some people started receiving their reductions last week. The government expects that by the end of this week, more than three million Australians will have had their debt cut.

The ATO says that it's aiming to have most of the reductions processed by the end of December, but that more complex cases aren't likely to be processed until early next year.

What if you paid off your student debt after June 1?

While many will see their existing balance reduced, a smaller group of people who had an outstanding HECS-HELP debt on June 1, but have since paid it off, will be in line to receive a refund from the ATO.

The ATO says that those eligible for a refund will receive it in their bank account linked to the tax office, unless someone has any outstanding debt with the ATO or another government agency, in which case the refund will be used to pay that off.

Refunds are also being processed separately to reductions, so the ATO has noted that most should be paid by the end of January.

Have HECS-HELP repayment thresholds changed?

Beyond seeing their debt reduced by 20%, Australians with existing student loans are likely to benefit from recent changes to repayments.

For the 2025-26 financial year the minimum threshold for compulsory HECS-HELP repayments has been lifted from $56,156 to $67,000.

Repayments are also now based on income above the $67,000 threshold, rather than on someone's total income.

For someone earning $70,000, the changes mean that they will see their compulsory repayments reduced by $1300 a year, according to the government.

How to make use of a refund or lower repayments

Those who do receive a refund in the coming weeks or see more money in their pay packets as a result of changes to repayments may want to consider how to use that money.

Naturally, many will look to put it towards day-to-day expenses, though Courtenay Walker, head of advice at Fox & Hare Financial Advice, suggests that others may want to consider other options.

"My first thought is that a lot of people will probably want to use any extra money to fund the cost of living. There are people who may be able to better afford their repayments though, perhaps those on higher incomes.

"In that case, the best use of those funds is going to be to save them in some capacity. That could be looking at some investments, so that you're getting that long-term benefit.

"Or maybe it's simply putting it in the bank where it can't be seen or touched, for a first home purchase down the line."

While everyone will have different priorities, Walker notes that because of the way HECS-HELP loans are structured, putting extra money towards them would usually only be advised in a handful of situations.

"As a generalisation, it's the best loan you're ever going to have, because of the indexation.

"When we tend to recommend to our members that they do pay it off is if the balance is small and they can pay it off in the short term to free up cash flow.

"Or if it's impacting their borrowing power. So, say they want to buy a house and the debt they have is impacting how much they can be lent."

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