What Is HECS-HELP?
HECS-HELP (Higher Education Contribution Scheme — Higher Education Loan Program) is Australia's income-contingent student loan scheme that allows eligible students to defer tuition fees for approved higher education courses. Instead of paying upfront, you accumulate a HECS-HELP debt that is repaid through the tax system once your income exceeds the minimum repayment threshold.
HECS-HELP replaced the original HECS scheme in 2005 and is administered by the ATO. More than 3 million Australians hold HECS-HELP or related study loan debts, making it one of the most widespread financial obligations for working-age Australians. As of 2024, total HECS-HELP debt outstanding exceeds $80 billion.
2025–26 HECS-HELP Repayment Rates
HECS repayments are calculated as a percentage of your repayment income. The rates for 2025–26 are:
| Repayment Income | Repayment Rate |
|---|---|
| Below $54,435 | Nil |
| $54,435 – $62,849 | 1.0% |
| $62,850 – $66,000 | 2.0% |
| $66,001 – $68,674 | 2.5% |
| $68,675 – $74,999 | 3.0% |
| $75,000 – $79,999 | 3.5% |
| $80,000 – $85,999 | 4.0% |
| $86,000 – $91,999 | 4.5% |
| $92,000 – $98,999 | 5.0% |
| $99,000 – $104,999 | 5.5% |
| $105,000 – $111,999 | 6.0% |
| $112,000 – $119,882 | 6.5% |
| $119,883 – $124,999 | 7.0% |
| $125,000 – $131,999 | 7.5% |
| $132,000 – $138,999 | 8.0% |
| $139,000 – $146,999 | 8.5% |
| $147,000 – $154,999 | 9.0% |
| $155,000 – $162,999 | 9.5% |
| $163,000+ | 10.0% |
Source: ATO — HECS-HELP repayment thresholds 2025–26. Thresholds are updated annually.
Repayment Income vs. Taxable Income
Your HECS repayment is not based on your taxable income alone. The ATO uses a broader measure called repayment income, which adds back certain amounts that may have reduced your taxable income:
- Taxable income: Base figure from your tax return
- Reportable fringe benefits: FBT grossed-up value of benefits from your employer (e.g., novated lease, hospital FBT exemption)
- Reportable employer super contributions (RESC): Salary sacrificed super contributions above the SG minimum
- Total net investment losses: Net rental or investment losses added back to income
If you salary sacrifice into super, this reduces your taxable income — but the sacrificed amount (as RESC) is added back to your repayment income. So salary sacrifice does reduce your HECS repayment obligation, but not by as much as it reduces your income tax. Use our Salary Sacrifice Calculator to model the combined effect.
HECS-HELP Indexation
Outstanding HECS-HELP debt is indexed to the Consumer Price Index (CPI) on 1 June each year. This means your debt balance grows with inflation. With CPI running at high levels in 2022–2024, many borrowers saw their balances increase significantly:
- June 2023: +7.1% indexation — the highest increase since the system began
- June 2024: +4.7% indexation
- June 2025: to be confirmed (based on March 2025 CPI data)
If your mandatory repayment in a given year is less than the indexation applied to your balance, your net debt can actually grow. For example, with a $30,000 debt and 5% indexation ($1,500), a mandatory repayment of $1,200 would leave your balance $300 higher than the year before.
Voluntary repayments made before 1 June reduce the indexation base and can save significant amounts on high-debt balances. There is no early repayment discount, but the CPI saving can be substantial when indexation is elevated.
How HECS Repayments Are Collected
Mandatory HECS repayments are collected through the income tax system:
- You advise your employer that you have a HECS-HELP debt (by ticking the box on your tax file number declaration)
- Your employer withholds additional tax from your pay based on the ATO's withholding tables
- The withheld amount is remitted to the ATO along with your regular PAYG withholding
- When you lodge your tax return, the ATO calculates your actual repayment obligation and adjusts for over- or under-withholding
If you forget to declare your HECS debt to a new employer, the ATO will still assess the repayment when you lodge your tax return — and you may face a large amount owing at tax time. Always update your TFN declaration when starting a new job.
Should You Pay Off HECS Early?
The decision to pay off HECS early versus investing or paying down other debt depends on the relative returns:
- HECS is indexed to CPI (not a fixed interest rate): When inflation is low (1–2%), the real cost of HECS is low. When inflation is high (5–7%), HECS grows faster.
- Investing alternatives: If you can earn more investing (e.g., in diversified equities or paying down a mortgage with a higher interest rate), investing or paying down the mortgage may be smarter than voluntary HECS repayments.
- Peace of mind: Eliminating HECS debt removes a perpetual obligation and frees up cash flow. For many Australians, this peace of mind has real value.
- Borrowing capacity: Paying off HECS debt can improve your home loan borrowing capacity, as lenders add projected HECS repayments to your existing debt obligations.
For personalised advice on HECS strategy, consult a registered tax agent or financial adviser. See also the ASIC MoneySmart HECS-HELP guide.