‘Early Christmas present’: Hecs debt relief is here – here’s what it means for you

When Anthony Albanese fronted the media last November to announce Labor would cut 20% of all student debt if he won government, he described the move as “about opening the doors of opportunity – and widening them”. A year later, the key election promise finally came into effect on Thursday, with 1.6 million people receiving the “early Christmas present” from the Australian Taxation Office on Thursday. Here’s how it works, who it will help and what’s missing. Sign up: AU Breaking News email What’s changing with Hecs? Now that the policy has passed, 20% of student debt will be wiped for the 3 million Australians with outstanding loans, equivalent to about $16bn, according to the federal government. Initially, 1.6 million people will benefit, with the rest to follow by the end of next week. The assistant treasurer, Daniel Mulino, said beneficiaries of the cut would be able to see it immediately in their MyGov accounts and would receive text messages next week, “notifying them of an early Christmas present”. The minimum repayment threshold has also been raised from $54,000 to $67,000, which is expected to save the average debt holder about $680 a year, and reduce the amount low-income earners have to pay. The measures are being sold as providing cost-of-living relief for young Australians, who hold the bulk of student debt. The education minister, Jason Clare, said on Thursday a student with the average debt of $27,000 would have about $5,500 shaved off their loans. For Australians on an average income of $70,000, he said the bill would reduce the minimum amount they were required to repay by about $1,300. Related: Labor moves to bolster penalty rates and overtime pay protections for millions of workers “That’s a lot of help for a lot of people, that’s going to make life a bit easier for a lot of young Australians, it’ll change the lives of a lot of young Australians,” he said. “It’ll mean they can pay off their debt a bit sooner. It gives them the chance to think about what’s next in life for them, make it easier to buy a home.” When will the debt relief come into effect? The legislation was introduced in July but did not come into effect until the final sitting week of parliament for 2025. That’s because changes to childcare were a high priority for Labor, and the Hecs reforms had to be debated as part of normal processes of parliament. But now it has been implemented , debt holders don’t have to do anything to receive the benefit. The federal government confirmed the ATO would retrospectively apply the one-off 20% reduction to all outstanding debt. It will be calculated based on what a person’s Help/Hecs debt amount was as of 1 June 2025, before the latest round of indexation was applied, meaning indexation will only apply to the remaining loan balance after it is reduced. Those who paid off their outstanding debt after 1 June will receive a refund from the ATO based on their balance at that time. Is anything else changing for students? Clare has flagged that more will be done in Labor’s second term to reform the higher education sector, but it may not happen fast. This week, the federal government introduced legislation to improve the integrity of the international education system, and to permanently establish a new Australian tertiary education commission. It won’t be legislated until next year. The independent body was a recommendation of the Universities Accord, handed down early last year. A priority of the commission will be reforming the pricing of degrees, including introducing needs-based funding into higher education, as is being rolled out at primary and secondary schools. Clare confirmed that part of its work on funding would be assessing the JRG package, without a timeframe for reform. What has been the response? Students had broadly welcomed the Hecs changes, while arguing they don’t go far enough. Ashlyn Horton, the president of the National Union of Students, said cutting debt was a “long overdue move” that indicated Canberra “might finally be listening” to concern about the rising cost of degrees. But she said the bill “doesn’t come close to fixing the structural mess that got us here”. “The core problem remains: students are still paying some of the highest fees in the OECD under a system that punishes them for choosing the ‘wrong’ degree,” she said. “That system has a name – the Job-Ready Graduates package (JRG) – and Labor has left it untouched.” The Coalition’s widely panned JRG scheme drastically increased the prices of arts degrees, which cost $50,000 as of 2024, to encourage students into other courses. Will the bill really ease the cost of living? While proving to be a popular policy among voters, the bill has been criticised for not addressing the root of student debt – which is indexation and the rising cost of degrees. Analysis conducted by the parliamentary library for the Greens and provided exclusively to Guardian Australia shows the 20% cut will be reduced to just 8% since Labor entered office when accounting for indexation since the 2022 election. That’s despite the federal government’s changes to indexation by tying Hecs/Help debts to the wage price index or consumer price index, whichever is lower. Related:Federal opposition flags more ‘sensitive’ approach to foreign students at Australian universities For instance, a student debt balance of $30,000 in 2022 would have risen to $33,454 before the student debt reduction as a result of indexation. After the 20% cut, it would drop to $26,763, and with 2025 indexation, rise to $27,619 – just 7.9% less than in 2022. The modelling assumes no repayments had been made. The Greens’ deputy leader and spokesperson on higher education, Mehreen Faruqi, said “Labor crowing about a small one-off debt reduction won’t fix the enormous burden of uni fees or student debt that keeps growing every year”. “Of course any student debt relief is better than none, but we are demanding all student debt be wiped and a return to free uni and Tafe, funded by taxing big corporations,” she said.