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HECS-HELP Repayment Guide 2025-26

How the new marginal repayment system works, what you'll actually pay at every income level, and whether it makes sense to pay your HECS off early.

Updated April 202610 min read
Based on published ATO ratesUpdated for 2025-26

What changed in 2025-26

The 2025-26 financial year brought the biggest overhaul to HECS-HELP repayments in decades. The government replaced the old flat-rate system with a marginal system, increased the repayment threshold, and applied a one-off 20% reduction to all outstanding study loan debts.

Old system (before 2025-26): Crossing a repayment threshold meant a single rate applied to your entire income. Earning $54,436 instead of $54,435 could trigger a repayment of $543 — a steep cliff that penalised small pay rises.

Under the new marginal system, repayment rates only apply to income above each threshold — the same way income tax brackets work. This eliminates the cliff effect and means a $1 pay rise never costs you hundreds in extra repayments.

The minimum repayment threshold also jumped from $54,435 to $67,000, which means roughly 80,000 fewer Australians are required to make compulsory repayments.

Try this scenario

See how HECS affects your take-home pay under the new marginal system. Toggle the HECS checkbox in the calculator.

Calculate with HECS on $85,000

Repayment thresholds and rates

These are the compulsory repayment rates for the 2025-26 income year. They apply to HECS-HELP, FEE-HELP, VET Student Loans, SA-HELP, and OS-HELP debts.

Repayment incomeMarginal rateHow it's calculated
Below $67,000NilNo repayment required
$67,001 – $125,00015%15% of income above $67,000
$125,001 – $179,28517%$8,700 + 17% of income above $125,000
$179,286+10% flat10% of total repayment income

Source: ATO — Study and training loan repayment thresholds and rates

Note on the top bracket: Once your repayment income hits $179,286, the system switches from marginal to flat — you pay 10% of your total repayment income, not just the amount above the threshold. At exactly $179,286, both methods produce roughly the same result, so there's no cliff.

Worked examples by salary

Here's what you'd actually repay at common salary levels under the 2025-26 marginal system.

IncomeCalculationAnnualPer fortnightEffective rate
$75,000($75,000 − $67,000) × 15%$1,200$461.6%
$90,000($90,000 − $67,000) × 15%$3,450$1333.8%
$110,000($110,000 − $67,000) × 15%$6,450$2485.9%
$130,000$8,700 + ($130,000 − $125,000) × 17%$9,550$3677.3%
$200,000$200,000 × 10%$20,000$76910.0%

What this means in dollars

On a $90,000 salary with a HECS debt

$3,450 per year in compulsory repayments

That's $133 per fortnight withheld from your pay — an effective repayment rate of 3.8%, compared to roughly 4.5% under the old flat-rate system.

Try this scenario

Enter your exact salary to see your HECS repayment alongside income tax, Medicare, and take-home pay.

Calculate your HECS repayment

Repayment income vs taxable income

Your HECS repayment is based on your repayment income, not your taxable income. Repayment income is a broader measure designed to capture income that might otherwise be sheltered through tax strategies.

Repayment income =

  • +Taxable income
  • +Total net investment losses (e.g. negative gearing on rental properties)
  • +Reportable fringe benefits amounts
  • +Reportable super contributions (e.g. salary sacrifice into super)
  • +Exempt foreign employment income
Common trap: Salary sacrificing $15,000 into super will reduce your income tax (you pay 15% contributions tax instead of your marginal rate), but it does not reduce your HECS repayment. The $15,000 gets added back as a reportable super contribution when calculating repayment income. The same applies to fringe benefits from novated car leases.

This means strategies that reduce income tax — salary sacrifice, negative gearing, novated leases — generally don't reduce your HECS repayment. The only way to reduce your compulsory repayment is to earn less repayment income (e.g. working fewer hours or taking unpaid leave).

Indexation: how your debt grows each year

HECS-HELP debt doesn't charge interest, but it is indexed each year on 1 June to maintain its value relative to the cost of living. Since 2023, the indexation rate is the lower of CPI or WPI (Wage Price Index) — a reform introduced after the 2023 CPI spike would have applied 7.1% indexation.

AppliedRateMethod
1 June 20191.8%CPI
1 June 20201.8%CPI
1 June 20210.6%CPI
1 June 20223.9%CPI
1 June 20233.2%Lower of CPI or WPIOriginally 7.1% CPI — retroactively reduced after reform
1 June 20244.7%Lower of CPI or WPI
1 June 20253.2% (est.)Lower of CPI or WPI

Source: ATO — Study and training loan indexation rates

What this means in dollars

On a $30,000 HECS debt at 3.2% indexation

$960 added to your debt on 1 June

If your compulsory repayment is less than the indexation amount, your debt balance actually increases that year — even though you're making repayments.

Timing tip: Indexation is applied on 1 June. If you're planning a voluntary repayment, making it before 1 June reduces the balance that indexation is calculated on. A $5,000 voluntary repayment made on 31 May at 3.2% indexation avoids $160 in indexation charges.

The 20% debt reduction (2025)

On 1 June 2025, the government applied a one-off 20% reduction to all outstanding HELP, VET Student Loan, Australian Apprenticeship Support Loan, and Student Financial Supplement Scheme debts. This was applied automatically — no application was needed.

The reduction was applied before the 2025 indexation, so the indexation that followed was calculated on the lower, post-reduction balance.

Example: $40,000 debt on 1 June 2025

  1. 1. Starting balance: $40,000
  2. 2. 20% reduction applied: −$8,000
  3. 3. New balance: $32,000
  4. 4. 2025 indexation (3.2%): +$1,024
  5. 5. Post-indexation balance: $33,024

Without the reduction, the same debt would have been $41,280 after indexation — a difference of $8,256.

If you fully repaid your loan before 1 June 2025, you didn't receive the reduction. The ATO notified eligible borrowers via SMS, email, or myGov inbox.

Should you make voluntary repayments?

Since HECS debt is indexed at roughly inflation rather than a commercial interest rate, the financial case for early repayment is weaker than for most other debts. The old 5% voluntary repayment bonus was removed in January 2017 — there's no discount for paying early.

When paying early might make sense

  • •Buying a home: Lenders include your compulsory HECS repayment when calculating your borrowing capacity. Paying down or clearing your HECS can increase how much you can borrow — potentially by $30,000–$50,000 depending on your income and remaining debt.
  • •Approaching a bracket boundary: If your income is just above $179,286, you're paying 10% flat on your total income. Dropping below through a career change or leave could shift you back to the marginal system.
  • •Psychological benefit: Some people value being debt-free regardless of the financial maths. This is a valid personal preference.

When investing instead usually wins

  • •Savings accounts: A high-interest savings account at 5%+ already outpaces HECS indexation of ~3.2%. Your money earns more sitting in savings than it costs you on your HECS debt.
  • •Other debts: Credit cards (20%+), personal loans (8-12%), and car loans (6-9%) all carry higher rates than HECS indexation. Pay these off first.
  • •Long-term investing: The Australian share market has returned roughly 7-10% annually over the long term. Over a 10-year horizon, investing a lump sum typically produces a better outcome than paying off HECS.

What this means in dollars

$10,000 lump sum: pay HECS vs invest at 7%

Investing wins by ~$3,700 over 10 years

At 3.2% indexation, HECS costs you $3,200 over 10 years. At 7% compound returns, $10,000 grows to $19,672 — a gain of $9,672. The net benefit of investing is roughly $6,400 before tax.

How employer withholding works

When you start a job, your employer asks you to complete a TFN declaration. If you tick the box indicating you have a HELP, VSL, SFSS, or TSL debt, your employer withholds additional tax from each pay to cover your estimated compulsory repayment.

The withholding is an estimate based on your projected annual income from that job. When you lodge your tax return, the ATO calculates your actual repayment based on your total repayment income from all sources. If too much was withheld, you get a refund. If too little was withheld (common if you have multiple jobs or investment income), you owe the difference.

Don't forget to tick the box: If you don't notify your employer about your HELP debt, they won't withhold the extra amount. You'll end up with a larger tax bill when you lodge your return, and the ATO may charge a General Interest Charge on the shortfall.

Try this scenario

See the difference in take-home pay with and without HECS — toggle the HECS checkbox on a $100,000 salary.

Compare with and without HECS

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