HECS-HELP Repayment Calculator Australia (2025–26)

Understanding HECS-HELP Repayment in Australia

More than 3 million Australians carry HECS-HELP debt — the government loan scheme that covers university and approved higher education fees. Unlike a standard loan, HECS-HELP has no interest rate. Instead, the outstanding balance is adjusted annually by the Consumer Price Index (CPI), and repayments are calculated as a percentage of your income rather than a fixed monthly amount.

The system is designed to be manageable: you only repay when your income exceeds a threshold, and the repayment rate is low at the bottom of the scale. But the interaction between CPI indexation and gradual repayments means the total cost — and time to pay off — can surprise many borrowers.

The Repayment Rate System

HECS-HELP repayments are calculated using a tiered rate system applied to your total repayment income. For FY2025-26, the threshold is $54,435. Below this, no repayment is required. Above it, the rate starts at 1% and increases through 19 brackets up to 10% for incomes above $159,663.

Critically, the percentage applies to your entire income, not just the amount above the threshold. This means crossing a threshold boundary causes a jump in your total repayment obligation. For example, moving from $79,345 to $79,346 income doesn't add $0.035 to your repayment — it changes your rate from 3% to 3.5% applied to the full income amount, adding roughly $395 in repayments.

CPI Indexation: The Hidden Cost

Every year on 1 June, the ATO applies CPI indexation to your outstanding HECS-HELP balance. The rate is set based on the All Groups CPI for the 12 months to March of the same year. It has ranged from near 0% (2020-21) to 7.1% (2023-24) in recent years.

The key thing to understand is that indexation is calculated on the balance before PAYG withholding credits are applied. If you've had HECS withheld from your salary throughout the year, those payments don't reduce your June 1 balance — they are credited after your tax return is lodged. This means your debt can grow by the full indexation amount even if you've been making withholdings all year.

In practice, for someone with a $30,000 balance in a 7% indexation year, that's an extra $2,100 added before any repayments are credited. For many graduates on lower incomes, their compulsory repayments may be less than the indexation applied — meaning the debt grows despite making payments.

Voluntary Repayments: Do They Make Sense?

Since January 2017, there is no bonus or discount for voluntary repayments. The decision comes down to a simple comparison: the indexation rate vs your expected after-tax investment return.

• If indexation is 3% and you can earn 7% investing, keeping the debt and investing makes financial sense.
• If indexation is 7% and you're in a savings account at 4%, paying down debt is better.
• One often-overlooked benefit of paying early: making a lump sum payment before 1 June reduces the balance on which indexation is calculated, saving you the indexation on that amount for that year.

HECS and Borrowing Capacity

If you're planning to apply for a mortgage, your HECS-HELP debt affects your borrowing capacity even though it's not a traditional liability. Lenders treat your compulsory repayment as a reduction to your disposable income. On an $85,000 income with a 4.5% repayment rate, that's $3,825 per year ($318/month) the bank counts against you when calculating how much you can borrow. The larger your debt and the higher your income, the more significant this effect.

Some borrowers choose to pay down HECS debt before applying for a home loan specifically to increase their borrowing capacity — particularly if their HECS repayments are keeping them below the lending threshold for the property they want.