HECS-HELP is the loan that pays for most Australian university degrees. You don't pay anything up front; the debt sits with the tax office and you repay it through your tax return — but only once your income is high enough. The system has changed a lot recently: a new $67,000 threshold, a brand-new marginal repayment formula, and a one-off 20% cut to balances. Here's how it all works in 2025–26.
What HECS-HELP is
HECS-HELP is the modern name for what most Australians still call HECS — the Higher Education Loan Program. When you enrol in an eligible course at a university or approved provider, the government pays your tuition fees and the amount becomes a debt you owe back. Crucially:
- The debt is held by the Australian Taxation Office, not a bank.
- There's no interest — the balance is indexed each year (more on that below), but never charged interest.
- It doesn't appear on your credit file, although banks now consider HECS repayments when assessing your borrowing capacity.
- There are no monthly repayments. You only pay through your tax return, and only when you earn above the threshold.
HECS-HELP is one of several HELP loans that share the same repayment system. The same rules apply to FEE-HELP (fee-paying postgrad), SA-HELP (student services), OS-HELP (overseas study), VET Student Loans and the Australian Apprenticeship Support Loan. If you have more than one, your combined balance is what matters.
When repayments kick in: the $67,000 threshold
You make a compulsory HECS-HELP repayment only once your repayment income for the year reaches the threshold. For 2025–26, that threshold is $67,000 — a big jump from $54,435 the year before. Below the threshold, your compulsory repayment is $0, no matter how big the debt is.
"Repayment income" isn't quite the same as your wage. It adds back a few extra items to your taxable income, including reportable fringe benefits, total net investment loss, reportable employer super contributions and exempt foreign employment income. For a typical employee with no investment property or salary-sacrificed super, repayment income and taxable income are usually similar.
The new marginal repayment system
From 1 July 2025, the way the ATO calculates compulsory repayments changed fundamentally. The old "flat-rate" system charged a single percentage of your entire repayment income once you crossed a threshold — so a $1 pay rise across a threshold could add hundreds of dollars to your annual repayment overnight. Brutal, and famously unfair on people near the boundaries.
The new marginal system works the same way income tax does: you only pay on the income above each threshold. Here's the 2025–26 table:
| Repayment income | What you repay |
|---|---|
| Up to $67,000 | Nothing |
| $67,001 – $125,000 | 15c for every $1 above $67,000 |
| $125,001 – $179,285 | $8,700 + 17c for every $1 above $125,000 |
| $179,286 and above | 10% of your total repayment income |
A quick worked example
Maya earns $90,000 in 2025–26. Her repayment income is the same. She pays nothing on the first $67,000, then 15c on each of the next $23,000:
Under the old flat-rate system, a $90,000 income would have triggered a single percentage applied to all $90,000 — typically a noticeably bigger bill. The marginal switch is permanently good news for almost everyone with a HECS-HELP debt.
How the debt grows: indexation
There's no interest on a HECS-HELP debt, but the balance is indexed on 1 June each year so it keeps pace with the cost of living. Since the 2024 reform, indexation is the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI) — whichever is smaller. The new formula was applied retroactively from June 2023, which clawed back the unusually high 7.1% indexation that caused public outcry that year.
The practical effect: your debt rises roughly with prices, but never faster than wages. In most years that's a few per cent.
The one-off 20% cut to balances
The biggest change to HECS-HELP in decades arrived in 2025. The federal government legislated a one-off 20% reduction to every HECS-HELP and student-loan balance. The legislation became law on 2 August 2025 and the ATO applied the cut automatically — to everyone's balance as it stood on 1 June 2025, before that year's indexation was added on top.
Because the 20% was calculated against the larger pre-indexation balance, the saving was at its most generous. A $40,000 debt on 1 June 2025 had $8,000 wiped off before any indexation, then was indexed at the (low) 2025 rate. For most graduates, it knocked years off the time to clear the debt.
Paying it off faster: voluntary repayments
You don't have to wait for the tax system to chip away at the balance. You can make a voluntary repayment to the ATO at any time, in any amount, by BPAY or bank transfer to the ATO's payment details. They reduce your balance immediately.
There's also a popular timing trick: pay before 1 June. Indexation hits your debt on 1 June each year, so any voluntary repayment that lands before that date reduces the balance that gets indexed. After 1 June a voluntary repayment still helps — it just doesn't dodge that year's indexation.
When the debt is gone
You're finished when your balance reaches zero — through compulsory repayments, voluntary repayments, or both. Once you're done, tell your employer to stop withholding the HECS-HELP component of your pay: that's a tick on a new Tax File Number declaration (or in your payroll system), and the extra tax goes back into your take-home pay. The ATO doesn't tell your employer for you, so it's on you to flick the switch.
The bottom line
For 2025–26, HECS-HELP is the friendliest version of itself in years. The threshold sits at $67,000, the new marginal system means a small pay rise doesn't lurch your repayment up by hundreds, balances were cut by 20% in 2025, and indexation is now capped at whichever is lower of wages or prices. The system isn't simple, but it's no longer punishing in the ways it used to be. The HECS-HELP calculator shows you exactly what your repayment will be for any income.