How does HECS-HELP debt work?

For most of us, HECS-HELP debt is something we shove to the back of our subconsciouses, only speaking of it briefly in hushed voices in darkened rooms. Many don’t even look at the costs of the classes they're undertaking at uni, ignoring these until we actually make enough money to start repayments, which is ages away… right? 

Here's how HECS-HELP debt works, what Aussies need to know about HECS-HELP indexation, and HECS-HELP repayments.

1. Savings.com.au’s two cents

University can be one of the best financial investments to make in your future, but that doesn't mean you should go blindly into the abyss. Research your courses thoroughly and understand the financial burden you will be taking on. It’s important to think about your HECS debt while you’re accruing it, not just while you’re paying it off. 

What is a HECS-HELP debt?

You might call government student loans either HECS (Higher Education Contribution Scheme) debt or HELP (Higher Education Loan Program) debt. For clarity, it's most-often referred to as HECS-HELP debts.

When you're offered a Commonwealth Supported Place (CSP) at a university or higher education institution. These places see the government subsidies a portion of your fees, while you pay the rest via a HECS-HELP loan.  

Once uni rolls around and census date for that semester has arrived, that’s it, your debt has begun, how exciting! You’re now one of the millions of people who owe the government billions.

HECS-HELP eligibility criteria

The eligibility criteria for HECS-HELP is fairly straightforward. You must be:

• an Australian citizen,
• a New Zealand Special Category Visa (SCV) holder,
• or a permanent humanitarian visa holder

And also:

• have a Tax File Number (TFN), and
• be enrolled in your courses by your institution’s census dates

Do I pay interest on HECS-HELP debt?

HECS-HELP loans are 100% interest free, but there's a catch. Instead of interest, your debt is indexed annually, rising in line with inflation or wages, whichever is lower.

Confused? It simply means your outstanding debt is lifted each year to keep pace with the cost of living or wage growth.

In 2025, the indexation rate was 3.2%, meaning if your debt was at $40,000 at the time of indexation, $1,280 would have been added.

But historically, indexation rates have been adjusted. In 2023 and 2024, when annual inflation came in at 7.1% and 4.7% respectively, many HECS debt holders were left reeling. The Federal Government then adjusted legislation to ensure HECS indexation rates mirror the lower of inflation or wages and impacted punters were refunded the difference.  

Mandatory HECS‑HELP repayments are taken out of your salary each pay cycle and held by the ATO. However, that money doesn’t actually reduce your HECS‑HELP balance until you submit your tax return for that financial year.

This timing often catches people off guard. As indexation is applied on 1 June each year, it’s usually calculated on the balance as at 1 July of the previous year - before any of your pay‑as‑you‑go repayments have been credited. 

When do I have to repay my HECS-HELP debt?

By the end of your student life, you’ll have uploaded a photo onto social media of you in your graduation gown, ready to take on the world. What next? Use that degree to make some money.

If you earn more than a certain amount going forward, you’ll be required to make repayments on your HECS-HELP loan. The more you earn above that threshold, the higher your repayments will be, until you pay the loan off entirely.

However, you won't need to keep track of it. If you do the paperwork your employer or accountant gives you correctly, your HECS-HELP repayments will be automatically taken from your income. Though, if you work for yourself you might need to set aside cash to meet your HECS-HELP repayments, the same way you do to pay your income tax. 

The thresholds change every year. Keep in mind that if you’re earning above the minimum repayment threshold while you’re still studying, you’ll still have to make repayments.

Here's where the thresholds stand at the time of writing:

A person's repayment income is their total taxable income, plus any reportable fringe benefits and super contributions, minus any investment loss or exempt foreign employment income.

1. Tip: Ensure your employer knows to set aside HECS-HELP repayments

If you have a HECS-HELP debt, it's important you let employers know by correctly filling in a tax declaration. That way they know to set aside extra tax from your pay to meet your HECS-HELP repayments.

While this means you’ll have more tax coming out of your pay cycles than necessary, any extra tax paid over the course of a year is refunded to you, and it's generally better to receive a tax return (for paying too much) than a tax bill (for paying too little). 

How to repay HECS-HELP debts if you move overseas

Moving overseas? If you have a HECS-HELP debt, you'll have to declare any income you earn to the ATO. While it might not charge you income tax, it will probably ask you to meet your HECS-HELP repayments.

Moving abroad used to be a loophole to avoiding HECS-HELP repayments. It previously cost the government around $30 million in annual repayments and was closed in 2016.

What happens to my HECS-HELP debt if I pass away?

If you pass away before fully repaying your HECS‑HELP debt, you needn’t stress from beyond the grave. Your debt will be cancelled and won’t be recovered from your estate.

However, your estate will still need to lodge a final tax return on your behalf. If your income for that financial year was above the compulsory HECS‑HELP repayment threshold, a final repayment may be taken before the remaining balance is wiped.

Warning: HECS-HELP repayments and salary sacrificing

Salary sacrificing can reduce your taxable income, but if you have a HECS-HELP debt, it can also lead to unexpected bills at tax time.

When you salary sacrifice, you pay for certain expenses from your pre‑tax income. This can make your taxable income appear lower during the year, and your employer will likely withhold HECS‑HELP repayments based on that lower figure.

However, when the ATO calculates your compulsory HECS‑HELP repayment at tax time, it adds back your reportable fringe benefits and salary‑sacrificed amounts.

Thus, your repayment income may be higher than your employer withheld for, and you may end up with an ATO bill when you lodge your tax return.

Should you make voluntary HECS-HELP repayments?

Repaying your HECS‑HELP debt isn’t usually overly encouraged, as it's essentially interest free debt and indexation only sees it increasing in 'real terms', i.e. alongside inflation or wages.

Though, some former-students might want to clear it early to avoid having extra money taken from their pay each cycle or simply to remove any associated psychological burden.

As a general rule, it’s often recommended those looking to live debt-free pay off debts in order of highest interest rate. Generally, this will see them starting by repaying consumer debt, such as credit card debt or personal loans, and repaying HECS-HELP debts last, if at all. This is called the 'avalanche' method.

Historically, the biggest benefit of paying off a HECS-HELP loan may have been realised by homebuyers. Since HECS‑HELP debt reduces your regular income, it can in turn reduce the amount a home loan lender is willing to lend to you. Though, how major mortgage lenders treat HECS-HELP debt has changed recently. 

For instance, CommBank no longer factors HECS-HELP debt into borrowing power calculations if it expects the applicant will repay the student loan within a year. Meanwhile, NAB doesn't consider mortgage applicants' HECS-HELP debts if they're less than $20,000. 

Voluntary repayments can be made directly to the ATO via BPAY, debt card, or credit card at any time.