HELP and other student loan debts
On 3 November 2024 the Government announced it will review the HELP debt system and make some major changes. They will reduce all current Higher Education Loan Program (HELP) debts and other student loan debts by 20%, prior to the indexation date in the current year of 1 June 2025.
Reducing the amount of debt that people currently have by 20%, means you will have less student debt to pay back.
The ATO will automatically apply the one-off 20% reduction to an individual’s HELP accounts before indexation is applied on 1 June 2025. Hence the indexation will only apply to the remaining balance of the debt.
Please note that as the Help debt does not incur interest, but is indexed each year based on CPI, as CPI increases, so too will the inflation charges on your debt. This has been extremely evident in the past few years and will mean that your loan debt is increasing substantially each year on a pro rata basis. Hence, please consider your options in regard to the debt.
For example your inflation rates in the 2024 financial year at a rate of 4%, the 2023 financial year rate was 3.2%, in the 2022 year was 3.9%, but only .6% in the 2021 year. The CPI rate has fluctuated between .6% and 2.6% since 2013, hence this is the first year in the past 10 years that the rate has been this high. The rate in the 2023 and 2024 financial year was actual much higher until the ATO finally decided to reduce and back date the rate reduction.
If you choose to voluntarily pay money off your HELP debt, it is best to pay this prior to 1 June each year, as the census date that the ATO apply the inflation adjustment is 1 June each year. Hence if we use the date of 30 April, this will allow enough time for the ATO to process your payment prior to the annual inflation charges being applied. You can make the payment directly from your Mygov account.
As much as we would normally encourage clearance or reduction of the HELP debt pre indexation, the 20% reduction is not to be ignored and will be beneficial to all clients with a HELP debt. So you may decide to not pay additional funds off pre 1/6/2025 for obvious reasons.
We have included a handout which covers the reduction for further reference.