How HECS-HELP repayments and indexation work in 2026

A HECS-HELP debt is unlike any other loan you'll have: it charges no interest, repayments are tied to your income rather than the balance, and it's collected automatically through the tax system. Here's how it actually works — and whether paying it off early is worth it.

No interest — but it's indexed

Instead of interest, your HELP balance is indexed once a year on 1 June to keep pace with the cost of living. Under the current rules, indexation is the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI) — a change that stops indexation running ahead of wages in high-inflation years.

Repayments are income-contingent

You only repay once your income passes the annual minimum threshold. Above it, a percentage of your income is withheld through your pay and credited at tax time. From 2025-26 the system became marginal: you repay a percentage only on the income above the threshold, rather than a flat percentage of your whole income — which removes the old "cliff" where a small pay rise triggered a big jump in repayments.

Should you pay it off early?

Because there's no interest — only indexation roughly tracking inflation — the "real" cost of a HELP debt is low. That's why many people don't rush to clear it: money put toward a mortgage (at 6%+) or invested for the long run often does more than paying down a debt that grows at ~CPI. The main arguments for paying it off are simplicity, freeing up take-home pay, and lenders counting your compulsory repayment against your borrowing capacity.

One timing note: because indexation hits on 1 June, a voluntary payment made before that date reduces the balance that gets indexed.

The bottom line

It's the cheapest debt most Australians will ever hold. Understand what your compulsory repayment is, factor it into your take-home pay, and only pay extra if the maths (and your goals) genuinely beat what that money could do elsewhere.

Related: income tax explained · income tax calculator. General information only, not tax advice — check the ATO.