Key points
- The Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 (the Bill) will amend laws relating to the management of student loan debt, including:
- the Higher Education Loan Program (HELP)
- Australian apprenticeship support loans
- Vocational education and training loans.
- The leading purpose of the Bill is a ‘debt reduction measure’ which will provide a one-off 20% reduction of student loan debts incurred on or before 1 June 2025.
- The Bill’s ‘fairer repayment system measure’ involves:
- increasing the minimum repayment threshold for compulsory student loan repayments from $54,435 in 2024–25 to $67,000 in 2025–26
- introducing a marginal repayment system for compulsory student loan repayments – calculated on income above the new threshold.
- These actions would fulfil commitments made prior to the 2025 federal election. They come in the context of the Australian Universities Accord Final Report, which recommended the change to a marginal repayment system, and expected this would entail setting new rates and thresholds.
- At the time of writing, the Bill had not been referred to or reported on by any parliamentary committees.
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Introductory Info
Date of introduction: 2025-07-23
House introduced in: House of Representatives
Portfolio: Education
Commencement: the day after Royal Assent
Purpose of the Bill
The purpose of the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 (the Bill) is to amend a range of laws governing the management of student loan debt, in order to:
- provide a one-off 20% cut to student loan debts incurred on or before 1 June 2025
- increase the minimum repayment threshold for student loans from $54,435 in 2024–25 to $67,000 in 2025–26
- introduce a marginal repayment system for compulsory student loan repayments that will change the repayment calculation method to be based on the portion of a person’s income above the new $67,000 threshold, rather than being based on total income.
The last point responds to a recommendation in the Australian Universities Accord Final Report (Accord Final Report). The Australian Government announced the ‘fairer repayment system measure’ components and the ‘debt reduction measure’ component in November 2024, making the commitments subject to re-election.
Structure of the Bill
- Schedule 1 covers the ‘debt reduction measure’, amending the following acts in order to implement a 20% reduction of the respective student support loan debt incurred by the person on or before 1 June 2025:
- Schedule 1, Part 1 implements amendments to provide the 20% reduction on debts incurred by the person on or before 1 June 2025, including the process for re-crediting the amount. Part 2 covers modification and transitional rules.
- Schedule 2, Part 1 addresses the ‘fairer repayment system’ measure, primarily through amendments to HESA that:
- change the minimum repayment income for an income year to $67,000 for 2025–26 (to be indexed annually)
- calculate the compulsory repayment rate at 15% of the part of a person’s repayment income that exceeds the minimum repayment amount but does not exceed $125,000
- calculate the compulsory repayment rate at 17% of a person’s repayment income that exceeds $125,000
- The part includes measures that:
- cap the compulsory repayment to no more than 10% of a person’s repayment income to prevent those on incomes around $180,000 from paying more under the new system than the current system
- change the indexation of repayment income thresholds (of which there are now 2 rather than 18) to be based on Average Weekly Earnings rather than the Consumer Price Index (CPI).
- Schedule 2, Part 1 also contains amendments to the AASL Act, the Social Security Act, the Student Assistance Act and the VSL Act. These acts refer to the repayment methodology under HESA. Part 1 also makes amendments to the Taxation Administration Act 1953 (TAA 1953) to update the matters that the Commissioner of Taxation must have regard to when making a pay as you go (PAYG) withholding schedule, to reflect the changes to the determination of repayment amounts under the other provisions of Part 1 of Schedule 2.
- Schedule 2, Part 2 covers application and transitional provisions.
HELP debt
When first introduced in 1989, the Higher Education Contribution Scheme, now HECS-HELP, had a flat contribution rate of $1,800 per annum. Repayments were compulsory once taxable income reached $22,000 (84% of the annualised May 1989 full-time Adult Weekly Ordinary Time Earnings – AWOTE, May 1989 release, Table 3) and had a maximum repayment rate of 3% for incomes over $35,000 (134% of the AWOTE).
In 2025, student contribution amounts range from $4,627 to $16,992 per annum, depending on the subject studied. For 2025–26, compulsory repayment of loans commence when repayment income reaches $56,156 (just under 55% of annualised AWOTE for November 2024), while those with incomes over $164,712 (just over 160% of AWOTE) have a repayment rate of 10%.
The Australian Taxation Office (ATO) publishes HELP statistics, of which the latest are for 2023–24. Figure 1 shows the average outstanding debt by debtor since 2005–06. In 2005–2006 there were 1,184,922 debtors and an outstanding debt of $12.4 billion, producing an average debt of $10,460. In 2023–24, there were 2,932,349 debtors and an outstanding debt of $81.0 billion, producing an average debt of $27,640.
Figure 1 Average outstanding debt ($) per debtor 2005–06 to 2023–24
Source: Australian Taxation Office, HELP Statistics 2023–24, Table 8.
The Australian Universities Accord
The Labor Party outlined its plan for establishing an Australian Universities Accord in August 2021. Minister for Education, Jason Clare, announced the Accord’s Expert Panel and the Terms of Reference in November 2022. After a 12 month review of the higher education sector, the Accord Final Report was published in February 2024.
The report includes section 4.2, ‘Improving student contributions and debt repayment arrangements’ (pp. 152–166). This section contains two sets of recommendations (16a–e, and 17a–c) out of the Accord Final Report’s 47 recommendations.
In late 2024, the Parliament passed the Universities Accord (Student Support and Other Measures) Act 2024, which changed HELP debt indexation such that it is based on the lower of the annualised change in the Consumer Price Index (CPI) or the Wage Price Index (WPI) over the previous 2 years. This change was in accordance with Recommendation 16d (p. 166).
Of the changes proposed in the Bill, the Accord Final Report only directly recommends the change to a marginal repayment system. However, it highlights that ‘changes in repayment rates and a decrease in the minimum repayment threshold means that repayment of HELP debts has become more burdensome for low-income earners over time.’ (p. 158) It calls for this issue to be rectified through a marginal repayment system, without ‘recommending specific new rates or thresholds for HELP repayments.’ (p. 161)
20% reduction to student loan debt
On 3 November 2024, the government announced it would cut 20% off all student loan debts by 1 June 2025. The reduction would apply to the following student loans:
- any of the HELP loans, including HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP
- VET Student Loans
- Australian Apprenticeship Support Loans
- Student Start-up Loans
- Student Financial Supplement Scheme.
At the time of the announcement, the Prime Minister confirmed it was dependent on the Government’s re-election. The proposal was included in the December 2024 MYEFO update (p. 8) and the March 2025 Budget (p. 102). The latter estimated net cash flows from student loans ‘to improve by $1.5 billion over the four years to 2026–27 compared to MYEFO’, owing to ‘increased voluntary loan repayment forecasts partially offset by the lower repayments resulting from reduced indexation’ (p. 101).
The Department of Education later provided further information on the proposal, including that it would be applied as a one-off 20% reduction to a person’s student loan debt amount as it was at 1 June 2025, before indexation was applied.
In an interview, Minister for Education, Jason Clare stated the following in regard to the cut:
The cost to the budget over the forward estimates, or the next four years, is about $700 million dollars. The cost over the longer term is around about $16 billion. We’re reducing the debt that’s owed by Australians to the Commonwealth over the next few decades by about $16 billion dollars.
The Government also released data on the impact of its proposed changes, including that ‘students and graduates would see an average of $5,520 wiped from their HECS debt’.
Marginal rate system and repayment thresholds
All student loan debts are managed by the Australian Taxation Office (ATO). An individual commences repaying their loan debt when their taxable income reaches the repayment threshold, which is currently indexed annually by CPI. For the 2025–26 income year, the minimum compulsory repayment threshold is $56,156. The Coalition Government lowered this threshold twice, in 2018–19 and again in 2019–20 (p. 93).
Currently, the rate at which the debt is repaid rises according to adjusted taxable income, up to the value of the debt. For example, a person earning $70,000 in 2025–26 will pay a maximum of 2.5% of their income (or $1,750); and a person earning $135,000 will pay a maximum of 8% (or $10,800). The exact amount is calculated by the ATO and added to the income tax assessment.
Recommendation 16b of the Accord Final Report calls for:
… reducing the financial burden of repayment on low-income earners and limiting disincentives to work additional hours by moving to a system of HELP repayment based on marginal rates (p. 166).
The Accord Final Report notes that HELP repayments now occur at a lower income threshold and at higher rates than originally envisaged (p. 158). It does not specifically recommend new rates or thresholds, suggesting that moving to a marginal repayment system will entail recalibration that may sufficiently reduce repayment amounts (p. 161).
On 2 November 2024, the Australian Government announced it would make ‘the repayment system fairer for all Australians with a student debt’. It would do so by lifting the minimum repayment threshold, and ‘introduc[ing] a system where repayments are based on the portion of a person’s income’ above this new threshold. The government proposed that, from 1 July 2025, the repayment thresholds would be:
- below $67,000 – $0
- $67,000 to $124,999 – 15c for each dollar over $67,000
- $125,000 and above – $8,700 plus 17c for each dollar over $125,000
The following rationale was given:
Individuals will be able to earn more before they need to start making compulsory repayments and the size of repayments will be less at any given level of income.
By making these adjustments to repayment rates and thresholds the Government will ensure that more people have more money in their take home pay now by ‘smoothing out’ the time and pace in which they repay their debt. (p. 2)
The Government’s proposal also indicated estimated compulsory repayment amounts and the expected reduction in repayment amounts for those earning less than $180,000, shown in Figure 2. The result for incomes above $180,000 takes into account the cap included in the legislation, whereby compulsory minimum repayments will not exceed 10% of a person’s repayment income, as is the current maximum repayment rate.
Figure 2 Estimated compulsory HELP repayment amounts
Income Threshold
| Current compulsory repayment amount estimated (2025-26)
| Compulsory repayment amount under proposed change
| Reduction in compulsory repayment amount
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$60,000
| $600
| $0
| $600
|
$70,000
| $1,750
| $450
| $1,300
|
$80,000
| $2,800
| $1,950
| $850
|
$90,000
| $4,050
| $3,450
| $600
|
$100,000
| $5,500
| $4,950
| $550
|
$110,000
| $7,150
| $6,450
| $700
|
$120,000
| $8,400
| $7,950
| $450
|
$130,000
| $9,750
| $9,550
| $200
|
$140,000
| $11,900
| $11,250
| $650
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$150,000
| $13,500
| $12,950
| $550
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$160,000
| $15,200
| $14,650
| $550
|
$170,000
| $17,000
| $16,350
| $650
|
Above $180,000
| $18,000
| No change
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Source: Department of Education, Making student repayments fairer, (Canberra: Department of Education, 2024), p. 2.
Effective marginal tax rates
Changing to a marginal repayment system will reduce effective marginal tax rates (EMTRs). Although HELP repayments differ from other types of EMTRs, the terminology is commonly applied in respect of the loss of disposable income caused by exceeding a threshold rate by one dollar. As Andrew Norton, explained in response to the Accord Final Report’s recommendation:
Under a marginal rate system HELP debtors would repay a % of all income above a threshold amount, instead of a % of all income once a threshold is reached, as now. An advantage of marginal rate repayment systems is that they can reduce effective marginal tax rates [EMTRs]. High EMTRs discourage people from taking on more paid work. In some cases under the current system EMTRs exceed 100%, so disposable income goes down despite nominal income going up.
A HELP debt’s effect on a person’s EMTR is further explained in the Accord Final Report, using the following example:
under current arrangements, a debtor earning $48,360 would have had no requirement to make a HELP repayment, whereas a debtor earning $48,361 would exceed the first HELP repayment threshold and would therefore have a repayment obligation of $483.61 – an effective tax of $483.61 on that one additional dollar. A debtor would see no increase in their after-repayment income until they earned an additional $490 (to a total of $48,850). (p. 160)
Recommendation 16b itself includes the argument that the EMTR impact of the current system could disincentivise people from working additional hours. Recent analysis supports the idea that some people do adjust their working patterns to avoid crossing a threshold.
Minimum repayment income threshold indexation
The Bill amends the annual indexation of the repayment income threshold amounts (set at $67,000 and $125,000 for 2025–26) to be based on Average Weekly Earnings rather than the Consumer Price Index (CPI). This change was not foreshadowed, and a reason for the change is not given in the Explanatory Memorandum.
It reverses reforms passed in 2018 and implemented in 2019. The 2018 reform was called for by Andrew Norton (p. 19) to stop thresholds rising too much, which he has since said ‘backfired’.
Outstanding reforms related to student loan debt
Job-ready Graduates
Many of the Government’s reforms in response to the Accord have met with the criticism that they are not tackling the bigger issue: the Job-ready Graduates (JRG) package. Introduced under the Morrison Government in 2021, JRG substantially increased the cost of arts and humanities degrees while decreasing the cost of degrees believed to better train students for jobs in in-demand industries (largely related to STEM). The Accord Final Report assesses it as follows:
Policy changes introduced as part of the JRG package in 2021, designed to influence student choice and usher students into areas of expected employment demand, have not worked. Rather, they have resulted in some students incurring disproportionately large HELP debts relative to future potential earnings, meaning that HELP debts are taking longer and longer to repay. (p. 153)
It concludes that JRG has undermined the purpose of the HELP system, to enable wider access and system growth:
Various cost pressures on students as a result of higher fees are impeding student access to, and participation in, higher education – with a consequential effect on further system growth. (p. 152)
Reporting also suggests JRG has not changed student enrolment behaviour as intended, only influencing 1.5% of students to change degrees (extended report also available).
Recommendation 16a of the Accord Final Report calls for reducing the student contribution rates introduced through the JRG, and a move ‘toward a student contribution system based on projected potential lifetime earnings.’ (p. 166)
Numerous higher education stakeholders and experts (see, for example, Andrew Norton, Universities Australia, and Professor Bruce Chapman ) and Parliamentarians (see, for example, the Australian Greens, Senator David Pocock and Members of Parliament Dai Le and Monique Ryan), have criticised the JRG, and the Government itself has declared the policy ‘didn’t work’.
The Government did not undo JRG during its first term and has recently said it expects the new Australian Tertiary Education Commission (ATEC) to consider the package and the ways it can be changed (p. 3). However, while the ATEC began work on an interim basis on 1 July 2025 and, subject to legislation, will be formally established by 2026, it appears unlikely that student contributions will change before 2027 at the earliest.
Indexation timing
Recommendation 16 of the Accord Final Report includes:
c. reducing repayment times by changing the timing of indexation for HELP loans so that amounts withheld for compulsory repayment can be accounted for before indexation is applied (p.166)
Currently, indexation applies to a HELP debt on 1 June, before compulsory repayments deducted from income over the previous 11 months are factored into the remaining debt amount. The result is indexation is applied to a higher amount, and produces a higher increase, than would otherwise be the case. See also Division 140—How are accumulated HELP debts worked out? of HESA .
Both Senators David Pocock and Tammy Tyrrell moved unsuccessful second reading amendments to the Universities Accord (Student Support and Other Measures) Bill 2024, which called on the Government to amend ‘the treatment of HELP debt repayments so that payments made in the year preceding the date interest is calculated are deducted from the amount of the debt before the interest calculation’ (Senator Tyrrell, second reading amendment, Universities Accord (Student Support and Other Measures) Bill 2024, 18 November 2024).
Dr Monique Ryan moved an amendment during consideration of the Bill to address both the timing of indexation (proposed as 1 December) and the changes to funding clusters (section 93-10 of HESA) introduced through the JRG package which substantially increased the cost of society and culture degrees. The amendments were unsuccessful and the government has not committed to reforming the date of indexation.
Commentary and stakeholder positions
20% reduction
Higher education experts such as Andrew Norton and Bruce Chapman, and some economists, have acknowledged the need for a type of ‘stopgap’ or relief measure, given increasing levels of student debt. But they have also highlighted that this necessity is based on the greater issue of JRG, and the delay in reforming it. Norton notes:
"If they can find $10 or $12 billion for this 20 per cent cut, surely they could find a much smaller amount of money to do a quick fix on the arts student contribution issue."
…
"To tackle this issue it needs to be done on the borrowing side first, rather than on the repayment side."
Other stakeholders, including representatives from student bodies such as National Union of Students (NUS), and the University of Sydney student representative council have echoed this argument. More recently the NUS voiced that it was ‘long overdue’ but didn’t ‘come close to fixing the structural mess’. The National Tertiary Education Union, has previously called for HECS debt relief.
Some experts, including Norton, highlight that it comes at a large cost to the government:
This will not be the full $16 billion they have announced, since that includes debt that is not expected to be repaid anyway.
For higher education debt, the government actuary estimates 24% of the debt outstanding as of June 30 this year will not be repaid. Even so, a 20% cut to the $57.1 billion “good” debt would still cost $11.4 billion.
Cutting vocational education debt by 20% would add around another $1 billion to the cost, after deducting debt that won’t be repaid. Debts for student income support tend to have high bad debt rates, but the 20% cut for them would also add to the government’s expenditure.
The equity aspect has also been called into question, with arguments that the measure is more likely to benefit higher-income earners and those with debts from expensive degrees, favours men over women, and that past and future debtors will miss out. Analysis by the e61 Institute, reported in numerous media outlets, found that ‘more than half of the financial relief offered will go to the top third of earners’ and ‘less than 20 per cent of the measure will flow through to those in the bottom third.’ The organisation called for more targeted forms of debt relief, such as an equal flat dollar amount of $5,500.
Repayment changes
As Andrew Norton outlined in a March 2024 post, there is often a fundamental conflict between supporters and opponents of a marginal rate system:
Is it better to clear HELP debts in smaller annual amounts over a larger number of years, so that these repayments have less of an impact on disposable income as people manage their cost of living, look to buy homes and think about starting a family, or is it better to clear debts quickly so that HELP repayments are no longer required at all?
Opposition to the government’s policy has centred on the way in which it will increase the time it takes a student to pay off their debt – and indeed, for some students to make their first compulsory payments given the raised threshold.
Senator Pocock commissioned the Parliamentary Budget Office modelling of the government’s HELP repayment scenarios, which showed that under the proposed system, ‘people with student debt will take longer to repay and incur higher indexation costs.’
Like the 20% reduction, this shift will affect some debtors more than others, particularly because it is dependent on income and therefore raises questions of fairness. Professor Alison Preston of UWA has published modelling challenging the claim that the changes will make our higher education system ‘better and fairer’. Professor Preston’s analysis argues that the changes will in fact widen the gender gap in student debt.
University representatives
There has been little response to the 20% student debt reduction proposal from university sector bodies. This could partly be because the sector at large has long-called for reforms to the Job-Ready Graduates package (JRG) as a more urgent and consequential priority. For instance, the Innovative Research Universities issued a paper in March 2025 calling for JRG reforms to be prioritised over student debt relief:
Debt relief is a substantial gift to the three million Australians currently holding student debt, but high student contributions under the Job Ready Graduates policy mean that future students are facing larger debts and longer repayment periods. Rather than forgoing up to $16 billion of Government revenue over the coming decades for further untargeted debt relief, the Government should invest now to fix the worst of the JRG student contribution rates. (p. 2)
Universities Australia did not comment on the 20% reduction specifically, but welcomed the proposed changes to student loan debt repayments.
Policy position of non-government parties/independents
The Coalition
Prior to the 2025 federal election, the Coalition opposed the 20% debt reduction, describing it as economically unsound, and an unfair use of taxpayer funds by prioritising assistance to university students:
“How is this fair when so many young Australians who aren’t or haven’t been students are struggling to pay the rent or put food on the table because of Labor’s cost-of-living crisis?
“This is also grossly unfair to the millions of Australians who have, in good faith, worked hard to pay off their HELP debt with no discount. (pp. 2–3)
The same media release included quotes from a number of experts criticising the plan. The Coalition similarly opposed the changes to thresholds and a marginal rate system, given it would result in people paying off less and having a student debt for longer: ‘For those on low incomes, this could consign them to a lifetime of debt.’
However, in the lead up to the introduction of the Bill, the new Shadow Minister for Education and Early Childhood, Senator Jonathon Duniam indicated that the Coalition expected the Bill to pass Parliament. While the Coalition has indicated it will support the 20% debt reduction, there has not been a clear declaration either way that the other key changes – including the marginal rate system of repayment – will be supported or opposed.
The Greens
The Greens have called for the forgiveness of all student debt and the introduction of free higher education. However, while preferencing the abolition of all student debt, the Greens have also publicly expressed their support for a marginal rate system, as well as for raising the minimum repayment threshold. The Greens proposed an amendment to the Universities Accord (Student Support and Other Measures) Bill 2024 for the 20% cut in an effort to force the government to implement the change before the election.
Independents
Senator David Pocock issued a media release after receiving modelling by the Parliamentary Budget Office (PBO) prior to the 2025 election. Senator Pocock welcomed the 20% cut, however, noted what he considers to be more pressing issues with the higher education system, particularly JRG. He also expressed concern that changes to repayment thresholds could have unintended consequences.
While supporting the 20% reduction, Dr Monique Ryan, has also called for urgent repeal of JRG, reform to indexation timing and expansion of prac payment: ‘We have to address the residual inequities in our tertiary education system now—not in two years’ time.’ Dr Ryan has pledged to introduce an amendment to the Bill that ‘will extend prac placement support to all care sector courses, reverse the Job-Ready Gradates schemes’ doubling of the cost of arts and laws degrees, and change the timing of HECS indexation.’ A proposed amendment to the motion for second reading of the Bill to be moved by Dr Ryan has been circulated.
On Tuesday 23 July 2025, The Guardian reported that Senator David Pocock, Dr Monique Ryan, Dr Helen Haines, Dr Sophie Scamps, Nicolette Boele and Kate Chaney intended to call for the government to enact more widespread reforms concerning a number of tertiary education areas, including on the timing of indexation and reversing the JRG.