How HECS-HELP Repayments Actually Work (And Why Your Debt Can Grow)
A plain-English breakdown of HECS-HELP indexation and compulsory repayments, and why your balance can rise even while you're paying it off.
7 min read
Try it yourself
Your HECS-HELP balance barely moved this year. Maybe it even went up, despite a full year of steady repayments coming out of your pay. That's not a glitch, and it's not unique to you. It comes down to two mechanics that almost nobody explains clearly: how compulsory repayments are worked out, and how indexation quietly adds to the balance every June. Both changed significantly in recent years, so even if you looked into this a few years ago, the numbers you remember may no longer apply. HECS-HELP is one part of a wider guide to property and debt on Snowball Invest, alongside mortgages and personal loans.
Quick answer
Since the 2025–26 income year, HELP compulsory repayments are calculated on a marginal basis: nothing is owed on income below $67,000, then set rates apply only to the income above that line, capped so you never repay more than 10% of your total income in a year. Your debt is also indexed once a year, which can add more to the balance than a modest repayment removes, especially early on when the debt is largest.
In this guide
- →What HECS-HELP actually is, and how it differs from FEE-HELP and SA-HELP
- →How compulsory repayments work now, under the new marginal system
- →Why indexation can still grow your balance even while you're repaying it
- →A one-off 2025 debt cut most explainers still haven't caught up with
- →Whether voluntary repayments are actually worth making
🎓 What HECS-HELP actually is
HECS-HELP is one of several loans under the Australian Government's Higher Education Loan Program (HELP), and it's the one that covers tuition fees for Commonwealth-supported university places, as opposed to FEE-HELP, which covers fees for full-fee-paying courses, or SA-HELP, which covers student services and amenities fees. Whichever HELP loan you have, the repayment and indexation rules work the same way.
There's no interest charged in the traditional sense, and nothing is due until your income crosses a threshold, which makes it far more forgiving than a personal loan or a credit card. But it isn't inert either. The balance moves every year, in both directions, and understanding why is the whole point of this article.
🧮 How compulsory repayments work now
This is the part that changed the most, and it's also the part most people still get wrong, because the system used to work very differently. Until the 2024–25 income year, HELP used a single flat rate applied to your entire repayment income once you crossed a threshold. Cross a boundary by one dollar, and your whole income (not just the dollar over the line) was taxed at the higher rate. It was a blunt, step-shaped system that could make a small pay rise sting.
From the 2025–26 income year, that changed. The government moved to a marginal system, closer to how income tax works: you only pay the higher rate on the slice of income that sits above each threshold, not on everything you earn.
Old system: rate applies to your whole income
Repayment jumps sharply at each threshold
New system: rate applies only above the threshold
Repayment rises smoothly as income grows
Here's how the current thresholds break down:
| Repayment income | Rate applied to that slice |
|---|---|
| Up to $67,000 | 0% |
| $67,001 – $125,000 | 15% of the amount above $67,000 |
| Above $125,000 | 17% of the amount above $125,000 |
| Any income | Repayment capped at 10% of total income |
Worked example: on a $90,000 salary, only the $23,000 above the $67,000 threshold is counted. At 15%, that's a compulsory repayment of roughly $3,450 for the year, not 15% of the full $90,000.
📈 Why indexation can still make your balance grow
Indexation is applied once a year, on 1 June, to whatever part of your debt has sat unpaid for more than 11 months. It exists so the loan roughly keeps pace with the cost of living, rather than quietly losing real value over decades. Until recently, indexation was tied purely to the Consumer Price Index (CPI), but after CPI spiked to 7.1% in 2023 and pushed up debts across the country, the government changed the formula. Legislation passed in late 2024, backdated to 1 June 2023, now applies whichever is lower: CPI or the Wage Price Index (WPI). Anyone indexed at the higher old rate in 2023 or 2024 received a credit for the difference.
The mechanism that catches people out is timing: indexation is applied to your balance before that year's compulsory repayment is subtracted. If your debt is large and your repayment is still modest (common in the first few years after graduating, especially under the higher new threshold), indexation can add more than your repayment takes off.
adds each JuneYour
HECS debtRepayments
reduce it
Early on, indexation can outweigh a modest repayment. The balance can rise before it falls.
This effect fades with time. As income rises and the balance shrinks, each year's repayment has a bigger effect and indexation has a smaller base to work on. The two lines cross, and the debt starts falling for real.
🎓 Try it with your own numbers
This is the same calculator referenced throughout this article. Adjust the figures below to match your own debt and salary.
✂️ The 2025 one-off 20% debt cut
🎯 The essential: Every HELP debtor got a one-off 20% cut applied automatically in 2025, before that year's indexation, worth checking landed correctly on your account.
Separate from the ongoing indexation and repayment mechanics above, the government legislated a one-off, retroactive cut to every outstanding HELP debt as part of its Universities Accord reforms. Applied automatically by the ATO in 2025, it reduced every HELP balance by 20%, calculated on the debt as it stood before that year's indexation was applied, removing more than $16 billion in total debt across over 3 million Australians. Nobody needed to apply for it, it was applied directly to existing HELP accounts.
It's a genuinely large, one-off change, not an ongoing annual feature of the system, so it's worth knowing it already happened rather than expecting it again. As at 30 June 2025, total outstanding HELP debt across the country sat at roughly $38 billion, down substantially from prior years partly because of this cut, spread across nearly 2.9 million debtors nationally, a useful reminder that a large, growing HECS balance is an extremely common experience, not an individual outlier.
⚖️ Should you make voluntary repayments?
Every voluntary dollar you pay reduces the balance immediately, which means less of it gets indexed the following June, so paying faster does lower your total cost over the life of the loan. Whether that's the best use of your money is a separate question, and it depends entirely on what else that dollar could be doing for you.
Voluntary repayments make sense when...
- ✓You're debt-averse and the psychological weight of owing money outweighs the maths
- ✓You have no better use for the spare cash right now
- ✓Indexation has been running high in recent years
You might be better off investing instead when...
- ✕You can reasonably expect to invest at a return higher than the indexation rate
- ✕You haven't yet built an emergency fund or paid off higher-interest debt
- ✕You value keeping cash accessible over becoming debt-free sooner
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❓ Frequently asked questions
Does HECS-HELP charge interest?
+
Not in the traditional sense. Instead of interest, the balance is indexed once a year, which has a similar effect of increasing what you owe over time.
Can I pay off HECS-HELP faster?
+
Yes. You can make voluntary repayments at any time through the ATO, on top of whatever is automatically withheld from your pay through your employer.
What happens if I move overseas?
+
Australian citizens and permanent residents with a HELP debt living or working overseas are still required to lodge income details each year and make repayments if their worldwide income exceeds the threshold.
Did the new marginal system reduce what most people pay?
+
For most borrowers, yes. The government's own modelling gave an example of someone earning $70,000 paying around $1,300 less per year in compulsory repayments under the new system compared to the old one.
Will the $67,000 threshold change in future years?
+
Thresholds and rates are set by the government and reviewed periodically, so they aren't fixed forever. Always check the current figures on the ATO website before relying on a specific number.
The only way to know how this plays out for your own numbers is to run them, not guess.
🎓 HECS-HELP Repayment Calculator
See your estimated payoff year, total repayments, and indexation added.
HECS-HELP is just one form of debt. If you're weighing it up against a mortgage deposit or other debts, the rest of the Property & Debt guide covers how much deposit you actually need and when debt consolidation genuinely helps.
📚 Recommended reading
The Psychology of Money
Morgan Housel
19 short stories on how people actually think and feel about money, not just the maths of it.
Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
Sources
- 1. Study and training loan repayment thresholds and rates, Australian Taxation Office
- 2. Compulsory repayments, Australian Taxation Office
- 3. Loan increases and indexation, Study Assist, Australian Government
- 4. HELP indexation rate, Australian Taxation Office
- 5. Making student repayments fairer, Department of Education, Australian Government
- 6. HELP indexation and debt reduction, Department of Education, Australian Government
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Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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