HECS HELP Debt Explained Australia | Repayment & Indexation Guide

By AusTaxTools Editorial Team ·

Short answer

HECS-HELP is the cheapest debt most Australians will ever hold. It is indexed to CPI rather than charged market interest, and repayments are income-contingent. The main decisions are whether to repay voluntarily and how it affects your mortgage borrowing power.

Income thresholds

From 2025-26 repayments are marginal: nil below $67,000, then 15% of income above $67,000, rising to 17% above $125,000, and capped at a flat 10% of total income from $179,286. The rate applies only to the income above each threshold — not your whole income — so crossing a threshold no longer triggers a cliff. Understand the brackets before negotiating a pay rise.

Indexation

Your balance is indexed annually on June 1 at CPI. In high-inflation years this can add thousands to your debt. This is the "hidden cost" of holding HECS long-term — and the main reason some graduates choose to pay down faster.

Borrowing impact

Lenders treat compulsory HECS repayments as an ongoing commitment when assessing serviceability. Paying down HECS before a mortgage application can meaningfully increase your borrowing capacity.

Common mistakes

  • Treating HECS as "free" debt without understanding how CPI indexation compounds in high-inflation years.
  • Voluntarily repaying HECS while carrying higher-rate consumer debt like credit cards or personal loans.
  • Not realising HECS reduces mortgage borrowing power — lenders count the compulsory repayment as an expense.
  • Missing the June 1 indexation date — a voluntary repayment just before June 1 reduces the balance that gets indexed.

HECS payoff timeline calculator

Project your year-by-year repayment schedule based on income and balance.

Income threshold lookup

Find your current repayment rate and see how income changes affect it.

How HECS affects borrowing

Check how your HECS repayment obligation reduces mortgage borrowing capacity.

Repayment formula logic

Understand the calculation mechanics behind all loan repayment types.

Cheapest debt, not free debt

HECS is unique — income-contingent and CPI-indexed. Understand the mechanics before deciding to repay early.

For most graduates the right move is to let HECS run and direct spare cash elsewhere. But check the numbers for your situation.

Open HECS payoff timeline calculator

Related Guides

Voluntary Repayments Strategy

When voluntary HECS repayments make financial sense and when your money is better used elsewhere.

HECS and Buying a Home

How HECS-HELP debt reduces borrowing power and strategies to minimise its impact on your home loan application.

Frequently asked questions

When do I start repaying my HECS-HELP debt?
Compulsory repayments begin when your repayment income exceeds the minimum threshold, around $54k for 2025-26. The ATO collects it through your tax return or PAYG withholding.
Should I voluntarily repay my HECS debt faster?
Usually no. HECS is indexed to CPI rather than charged market interest, so most people are better off directing extra cash toward higher-cost debt or investments. But if indexation spikes, the calculus changes.
Does HECS-HELP affect my home loan borrowing power?
Yes. Lenders include compulsory HECS repayments in your expense assessment, reducing your borrowing capacity even though it is not traditional interest-bearing debt.