HECS-HELP Repayments in Australia

What is HECS-HELP?

HECS-HELP is the Australian government's income-contingent loan scheme for eligible higher education students. Rather than paying tuition fees upfront, eligible students can defer the cost and repay it later through the tax system once their income reaches a certain threshold.

The scheme was originally called HECS (Higher Education Contribution Scheme), introduced in 1989. It has since been expanded and renamed. Today, HECS-HELP refers to loans for Commonwealth-supported students at universities and other providers. A separate loan product, FEE-HELP, covers full-fee-paying students and some other courses.

Unlike most loans, HECS-HELP does not charge interest. Instead, the debt is indexed once a year to reflect either CPI or wage growth, whichever is lower, so the balance keeps roughly its real value rather than growing indefinitely. In most years this indexation is modest; see the Indexation section below for exactly how it's calculated.

How repayments work

Repayments are not a fixed monthly amount. They are calculated as a percentage of your income and collected through the tax system, either via PAYG withholding throughout the year or as an assessment when you lodge your tax return.

The repayment rate applies to your Repayment Income, broadly your taxable income plus reportable fringe benefits and certain other amounts. From 1 July 2025, repayments use a marginal rate system: the rate applies only to income above each threshold, not your total income. Compulsory repayments are assessed alongside other amounts calculated from your taxable income, such as the Medicare levy, when you lodge your tax return.

The minimum repayment threshold changes each year, check ato.gov.au for the current figure. For FY 2026–27, the threshold is $69,528. Income above that is subject to a 15% marginal rate up to $129,717, then 17% up to $186,050, then 10% of total income above that level.

Indexation

On 1 June each year, the ATO applies indexation to the part of your loan that has remained unpaid for more than 11 months. Since a 2024 law change, the rate is whichever is lower: the change in the Consumer Price Index (CPI) or the change in the Wage Price Index (WPI, a measure of wage growth). Before this reform, indexation was based on CPI alone. The ATO publishes the current and past rates in its indexation rates table.

For most of the 2010s, indexation was between 1% and 3%. Under the old CPI-only rule the 2023 rate was 7.1%, reflecting higher inflation in 2022-23. That spike is what prompted the move to a lower-of-CPI-or-WPI formula, which was applied retrospectively from 1 June 2023: the 2023 rate was replaced with 3.2% (and the 2024 rate with 4%, down from 4.7%), and the ATO credited affected balances. On a $50,000 debt, 7.1% would have added $3,550 in one year; 3.2% adds $1,600.

Separately, a one-off 20% reduction was applied to all study and training loan balances that existed on 1 June 2025, and the ATO has completed processing it.

Indexation is applied to the balance before any compulsory repayments made during the financial year. Voluntary repayments reduce the balance the indexation is calculated on if made before 1 June.

Should you pay it off early?

This is one of the most debated personal finance questions for Australians with HECS debt. The core comparison is: does paying off HECS give a better financial return than using that money for something else?

If the indexation rate is lower than the return you could earn by investing instead, keeping the HECS debt and investing the surplus is mathematically preferable. In a low-inflation environment (2% indexation vs 7% investment return), this argument is straightforward.

When indexation is high the calculation shifts. A rate like the 7.1% the old CPI-only rule originally produced for 2023 would be close to or higher than safe investment return assumptions. The certainty of eliminating the debt also has value that pure return comparisons do not capture.

There is no single right answer. It depends on indexation forecasts, your investment returns, your cash position, and personal preference for carrying debt.

Voluntary repayments

You can make voluntary repayments to the ATO at any time through MyGov or by direct payment. Unlike the compulsory repayments, these do not affect your take-home pay throughout the year as they reduce your outstanding balance directly.

Note that voluntary repayment bonuses (which used to offer a 5% or 10% discount) were removed in 2017. There is no longer a financial incentive from the government for early voluntary repayment beyond the interest-rate comparison above.

Common misconceptions

"HECS is interest-free so I should ignore it"

Ignoring indexation as a cost is a mistake. Annual indexation increases the real value of the debt each year. In low-inflation, low-wage-growth years the cost is minor, but the debt is not static.

"I should always pay it off as fast as possible"

This depends on the math in any given year. In low-inflation years, investing produces better expected returns than paying off HECS. Blanket urgency about repayment is not always justified.

"My debt will be forgiven if I don't pay it off"

HECS-HELP debt is only cancelled upon death or permanent incapacity. There is no statute of limitations or forgiveness after a certain number of years. The debt stays until it is repaid.

Frequently asked questions

Does HECS debt affect my ability to borrow for a home?

Yes, indirectly. Lenders assess your repayment commitments as part of borrowing capacity calculations. Compulsory HECS repayments reduce your disposable income and therefore the loan amount a lender may approve. Paying down HECS before applying for a mortgage can increase borrowing capacity in some cases.

What happens to HECS debt if I move overseas?

Since 2017, Australians living overseas with HECS-HELP debt must make repayments if their worldwide income exceeds the repayment threshold. You report income through the ATO each year and repayments are assessed. The debt does not pause simply because you are not living in Australia.

Does HECS debt show on my credit file?

No. HECS-HELP debt is not a credit liability and does not appear on credit reports. However, it is visible to the ATO and will appear on lenders' income assessments if you provide recent tax returns or ATO notices.

When is the indexation applied each year?

Indexation is applied on 1 June each year to the part of your loan that has been unpaid for more than 11 months. Voluntary repayments made before 1 June reduce the balance that indexation is calculated on. Timing a voluntary repayment before that date can reduce the indexation cost for that year.

Official sources

• Australian Taxation Office - repayment thresholds, rates, and indexation figures
• Study Assist - HECS-HELP and FEE-HELP eligibility and loan details

Looking for just the current thresholds? See the HELP/HECS quick-reference sheet.