How HECS/HELP debt and indexation actually work

Key points

• HELP repayments run through the tax system: your employer withholds extra tax once you tick the study-loan box, and the withheld amounts only come off the loan when your tax return is assessed. There's no monthly statement, no direct debit and no due date.
• For 2026-27 there's no compulsory repayment below $69,528 of repayment income. Above that the repayment is marginal – 15c for each dollar over the threshold, stepping up on higher incomes, with a flat 10% of repayment income from $186,051.
• Indexation is applied once a year on 1 June, to any part of the debt that has been unpaid for more than 11 months, at the lower of CPI and the Wage Price Index. The 1 June 2026 rate was 2.8%.
• A HELP debt charges no interest and doesn't appear on your credit report, however lenders do ask about it in loan applications because the compulsory repayment reduces your take-home pay.

Many people still call it HECS, the paperwork now calls it HELP (the Higher Education Loan Program), and either way it works like no other debt you're likely to carry. There's no monthly statement, no direct debit and no due date. Repayments come out of your pay as extra tax before the money ever reaches your account, and the balance only goes up once a year, on 1 June, when indexation is applied. That unusual setup can make the debt harder to follow, so here we go through the mechanics: how repayments happen, what indexation is and when it lands, the case for and against paying extra, and where the debt sits when a lender assesses you.

How do HELP repayments actually work?

Through the tax system, not a direct debit (there's no bill, and nothing to remember to pay). When you start a job, one of the questions on the tax declaration you complete for your employer is whether you have a study or training support loan. Tick that box and your employer withholds extra tax from each pay, on top of the usual amount. However the withheld amounts don't come off your loan as they're taken: they're held with the rest of your tax, and the repayment is credited against your balance when your tax return is assessed after the end of the financial year.

Whether you repay at all, and how much, depends on your repayment income for the year – and repayment income is broader than taxable income. It's your taxable income plus reportable fringe benefits, reportable super contributions, any net investment losses and some exempt foreign employment income, so salary-sacrificed super (for example) counts towards it. For 2026-27, nothing is compulsory below $69,528. Above that, the repayment works marginally, the same way income tax does: you pay a percentage of the dollars above the threshold, not a percentage of everything you earn.

On a repayment income of $85,000 (illustrative), the compulsory repayment is 15% of the $15,472 above the threshold – about $2,321 for the year, or roughly $45 a week. The marginal approach is fairly new: it began in 2025-26, when the threshold was $67,000, so if these numbers look different from what you remember, that's why. The thresholds change from year to year, and the figures above are for 2026-27 only.

What is indexation and when does it land?

Indexation is the annual increase applied to your HELP balance, and it lands on 1 June each year. It applies to any part of the debt that has been unpaid for more than 11 months (so amounts you only borrowed during the year aren't indexed at their first 1 June). Since 2023, the rate has been the lower of two measures: the Consumer Price Index and the Wage Price Index, both measured to the March quarter. The rate is announced around late April, which gives you a few weeks' notice of what will be applied. The 1 June 2026 rate was 2.8% – on a balance of $25,000 (illustrative), indexation added $700.

A HELP debt charges no interest. The only thing that increases the balance is indexation – once a year, on 1 June, at the lower of CPI and the Wage Price Index.

If your balance looks lower than you expected, there's a one-off reason: balances as at 1 June 2025 were reduced by 20%, applied before the 2025 indexation was calculated. The ATO did this automatically – most reductions were processed by the end of 2025, with complex cases finalised in early 2026 – and there was nothing to apply for.

Should you make voluntary repayments?

Compare the indexation saved with what the money could do elsewhere (the answer depends on your other debts, your buffer and what the money would otherwise be doing).

The case for comes from how the loan works. A HELP debt charges no interest, so indexation is the only way the balance grows, and a voluntary repayment made before 1 June reduces the balance that indexation is applied to. At the 2026 rate of 2.8%, every $1,000 repaid ahead of 1 June is ~$28 of indexation that doesn't get added (illustrative).

The case against is everything else the money could do. Putting the same $1,000 towards a credit card balance at around 20% avoids about $200 of interest over a year (illustrative), which is a much larger saving than the indexation it would have prevented. And if there's nothing between you and the next unexpected bill, building a buffer can matter more than paying down either debt – we've gone through that trade-off in how to build an emergency buffer while paying off debt, and the reasoning holds here too.

In practice, it depends on what else the money could be doing. A credit card balance charging interest, or a buffer that doesn't exist yet, can be the more pressing use of the same dollars – however if those are covered, a voluntary repayment before 1 June means less indexation added and a balance that's gone sooner. Both are reasonable positions, and it's completely fine to leave a debt that charges no interest alone while you put the money somewhere more urgent.

How lenders see your HELP debt

A HELP debt doesn't appear on your credit report. However, lenders do ask about it when you apply for a loan, and the reason is the mechanics above: the compulsory repayment reduces your take-home pay, and your take-home pay is what a lender assesses new repayments against. So at the time you apply, a HELP balance sits in the serviceability assessment (the lender's check of your income against your commitments) beside your credit cards, personal loans and anything else you're repaying. The question is about your cash flow while the repayments run, and knowing your balance and roughly what you'll repay this year means you can answer it accurately.

Whatever you decide about extra repayments, the practical starting point is the same: the balance itself, roughly what this year's compulsory repayment will be, and when the next 1 June falls.

Pro tip: A HELP debt is easy to lose track of because nothing about it ever arrives in the mail. Keeping it in WeMoney beside your connected accounts puts all your debts in one place – including the one that never sends a statement.

Sources

• ATO: Study and training support loans rates and repayment thresholds
• Study Assist: Loan increases and indexation
• Department of Education: HELP indexation and debt reduction

This article provides general information only. It does not take your personal circumstances into account and is not financial, credit or legal advice. Consider your own situation and seek advice from a suitably qualified professional if you need it.