HECS-HELP Repayment 2025–26: Thresholds, Rates, and How to Pay Off Your Debt Faster

What Is HECS-HELP and How Does It Work?

HECS-HELP (Higher Education Contribution Scheme — Higher Education Loan Program) is an Australian Government loan that allows eligible students to defer the cost of their university education until they earn above a certain income threshold. Rather than paying upfront, you accumulate a HECS-HELP debt while studying, which is then repaid through the tax system once you earn enough.

It is important to understand that HECS-HELP is not a commercial loan. There is no interest charged in the traditional sense. However, the debt is indexed annually to the Consumer Price Index (CPI), which means it increases with inflation each year. In recent years, high inflation has made this indexation a hot-button issue for millions of Australian graduates.

2025–26 HECS-HELP Repayment Thresholds and Rates

Your compulsory HECS-HELP repayment is calculated as a percentage of your repayment income — which is your taxable income plus your total net investment loss plus any reportable fringe benefits and reportable employer super contributions.

If your repayment income is below the minimum threshold ($54,435 for 2025–26), you make no compulsory repayment that year.

How HECS Repayments Work Through Your Tax Return

HECS-HELP repayments are collected through the PAYG (Pay As You Go) withholding system. If you have a HECS debt, you should indicate this on your Tax File Number declaration when starting a new job. Your employer will then withhold extra tax from your pay to cover your estimated HECS repayment.

When you lodge your annual tax return, the ATO calculates your actual repayment obligation based on your total income for the year. If too little was withheld (because you worked multiple jobs, for example), you will have a tax debt. If too much was withheld, you will receive a refund.

What Happens If You Don't Tell Your Employer?

If you forget to tell your employer you have a HECS debt, they will not withhold the additional amount. You will likely receive a tax bill when you lodge your return equal to your full annual HECS repayment obligation. This catches many young workers by surprise in their first year of full-time work after graduation.

The Indexation Issue — What Happened in 2023 and 2024?

Every year on 1 June, outstanding HECS-HELP debt balances are increased by the CPI (Consumer Price Index). This indexation is applied before any repayments made during the financial year are credited, which means in high-inflation years, the amount of indexation added to your debt can exceed the amount you repaid — leaving you worse off than before.

This became a major political issue in 2023 and 2024 when CPI indexation of 7.1% (June 2023) and 4.7% (June 2024) wiped out the repayments many Australians had made. The Albanese Government announced partial relief, and from 2025, a new cap was introduced so that indexation cannot exceed either CPI or the Wage Price Index (WPI), whichever is lower — giving graduates some protection during high-inflation periods.

Voluntary Repayments — Are They Worth It?

You can make additional voluntary repayments to your HECS-HELP debt at any time through the ATO's online services. There is no penalty for doing so. But should you?

The Case For Voluntary Repayments

• If inflation is high and your debt is growing faster than you are repaying it, paying down debt reduces the base on which indexation is calculated
• Peace of mind — particularly for high earners who want to eliminate the debt quickly
• If you are approaching retirement and want to clear all debts

The Case Against Voluntary Repayments

• HECS-HELP has no interest (only CPI indexation). In years where CPI is low (under 3%), other investments may outperform the effective cost of carrying the debt
• Your money may be better used paying off high-interest debt (credit cards at 20%+ are far more urgent)
• Investing in superannuation or an index fund with long-term returns of 7–10% may outpace low indexation years
• There is no longer a bonus for making voluntary repayments (the 5% early repayment bonus was abolished in 2017)

The general rule of thumb is: pay off high-interest debt first, then evaluate HECS based on the current and expected inflation rate.

HECS-HELP If You Live or Work Overseas

A common misconception is that moving overseas means you can escape your HECS-HELP debt. This is no longer the case. From 1 January 2016, Australians living overseas must make compulsory HECS-HELP repayments if their worldwide income exceeds the repayment threshold, equivalent to approximately AUD $54,435.

You must lodge an Overseas Levy Assessment with the ATO each year while living abroad. Failure to do so can result in penalties and interest. The ATO has significantly improved its data-matching capability with foreign tax authorities to identify non-compliant overseas debtors.

Strategies to Pay Off HECS Faster

1. Ensure your employer knows about your HECS debt — This avoids a large tax bill at the end of the financial year and keeps your repayments on track.
2. Make voluntary repayments in high-inflation years — Before 1 June each year, the ATO applies indexation. Making a payment before this date reduces the balance on which indexation is calculated.
3. Consider your salary package structure — If you salary sacrifice into super, your taxable income decreases. This can reduce your HECS repayment rate bracket. However, be aware that reportable employer super contributions are added back into your repayment income.
4. Lodge your tax return on time — The ATO applies HECS repayments when you lodge. Delayed lodgement means delayed repayment crediting while indexation continues to accrue.
5. Monitor your balance — Check your HECS-HELP balance anytime via myGov → ATO → Study and training loan account.