20% Student Debt Cut & Higher Repayment Thresholds

18/08/2025 12:07 PM

20% Student Debt Cut & Higher Repayment Thresholds

A Bill now awaiting royal assent, will reduce outstanding student debts by 20% and increase the existing repayment thresholds, aiming to make the student loan system fairer.

This measure comes in addition to the measure enacted last year that capped the indexation of outstanding student loans at the lower of the consumer price index or the wage price index.

Marginal repayment system

The minimum repayment threshold is also proposed to increase from $54,435 in 2024–25 to $67,000 in 2025–26.

Minimum compulsory repayments are calculated as a percentage of the "repayment income" once it exceeds a set threshold. The repayment rates are marginal, meaning only the portion of the income that falls within each threshold is subject to the corresponding repayment rate.

Next steps

You are not required to action anything. Once legislation is enacted, the ATO will retrospectively apply the 20% reduction to your debt and the indexation that was applied will also be adjusted.

If you are thinking of paying off your student debt, you may be better off by waiting till the Bill receives royal assent and the ATO informs you of your final payoff amount.

The increased repayment threshold means that if you earn less than $67,000, you are not required to make any repayments, you may still continue to make voluntary payments if you wish.

We can help you with navigating through the changes that may apply to your particular situation. For further discussion, please feel free to contact our office.

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