Education · Australia

HECS-HELP Explained: What Your Uni Debt Really Costs

HECS-HELP is unlike almost any other debt: there's no interest, no repayments until you earn enough, and the balance dies with you. But "interest-free" isn't "cost-free" — indexation grows the balance every June, and compulsory repayments bite a real slice of your pay once you cross the threshold. Here's how it actually works.

How repayment works

• Repayments are income-contingent: nothing is due until your repayment income crosses the annual threshold (around the low-$50,000s; it moves each year).
• Above the threshold, a percentage of your whole repayment income (rising with income, roughly 1%–10%) is withheld through PAYG by your employer.
• There's no term and no default: earn less, pay nothing; the debt simply waits.

Indexation — the part people get wrong

Each 1 June, the outstanding balance is indexed. After the 2023 spike (7.1%) the rules were reformed: indexation is now capped at the lower of CPI or the Wage Price Index, applied retroactively to 2023 — so a wage-stagnant, high-inflation year can't blow out balances the way it once did. Indexation is not interest (it doesn't compound on missed payments), but it does mean a balance you ignore still grows in nominal terms.

What a degree costs by band

Your annual student contribution depends on the subject band, not the university:

Band	Typical subjects	Approx. annual contribution
Band 1	Nursing, teaching, maths, agriculture	~$4,500
Band 2	Most science, engineering, IT, allied health	~$8,300
Band 4	Law, business, economics, most humanities	~$16,500

A three-year Band 4 degree approaches $50,000 of HELP debt before indexation — a four-year double degree can clear $60,000.

Should you ever pay it down early?

• Usually no. Indexation (capped at the lower of CPI/WPI) is typically below what the same money earns in super, an offset account, or even a high-interest saver — and far below any other debt's interest rate.
• Sometimes yes: just before a home-loan application (lenders count the repayment percentage against your borrowing power), or a small voluntary payment just before 1 June to dodge indexation on the amount.
• Never at the expense of an employer-matched super contribution or paying down a credit card.

Frequently asked questions

When do you start repaying HECS-HELP?
Repayments begin once your income passes the compulsory threshold, which is $69,528 for 2026-27. Below that you repay nothing, and the debt is collected through the tax system rather than by a lender.

How much do you repay?
For 2026-27 repayments apply marginally — 15% of income between $69,528 and $129,717, then 17% above that, capped at 10% of total repayment income. That marginal structure replaced the older system where crossing a threshold applied a rate to your whole income.

Does HECS-HELP charge interest?
Not interest as such. The balance is indexed annually, and since the 2024 reform indexation is capped at the lower of CPI or the Wage Price Index — which materially reduced the real cost of holding a debt for a long time.

Should I pay off HECS early?
Usually not. Because repayment is income-contingent and indexation is capped at wage or price growth, money is normally better directed at a mortgage offset account or superannuation. Voluntary repayment mainly helps people about to apply for a home loan, since the compulsory repayment reduces borrowing capacity.

Sources

• StudyAssist (Australian Government) — HECS-HELP and student contribution bands
• ATO — Study and training support loans repayment thresholds and rates
• Universities Accord response (2024) — indexation capped at lower of CPI/WPI, backdated to 2023

Figures as of June 2026. Thresholds and bands change each financial year — verify on StudyAssist/ATO. This is general information, not regulated financial advice (ASIC).