If you’ve got HECS debt sitting in the back of your mind (or dominating your financial thoughts), you’re not alone. Over three million Australians are currently managing student loan debt, and with recent changes rolling out right now, there’s never been a better time to understand your options for paying it off.
Let’s break down everything you need to know about how to pay off HECS debt in Australia, including some calculation examples that’ll show you exactly what you’re dealing with.
What Actually Is HECS-HELP Debt?
HECS-HELP debt covers all types of educational loans in Australia. The education loan program HELP is designed to assist eligible students with the cost of higher education in Australia. Think of it as an umbrella term that includes HECS-HELP for uni courses, FEE-HELP for full-fee programs, VET Student Loans, and a few others like OS-HELP and SA-HELP.
HECS-HELP is a type of higher education loan provided under the Australian Government’s Higher Education Loan Program (HELP). Eligible students can access these loans if they meet certain citizenship and residency requirements, are enrolled in a Commonwealth-supported place, and have not exceeded their HELP loan limit.
Here’s what makes these loans different from regular debt: the Australian Government pays your course fees upfront, and you pay them back later based on what you earn. The student contribution is the portion of tuition fees that students are responsible for, and the student contribution amount is the specific fee you must pay, either upfront or through a HELP loan, after government subsidies. No credit checks, no interest charges (although there is indexation, which we’ll discuss later). HECS-HELP loans are interest-free loans provided by the Australian government to cover the tuition fees of higher education students.
When Do You Actually Pay HECS Debt?
This is where things get interesting, especially in 2025-26. The government just made some massive changes that’ll put more money back in your pocket.
The compulsory repayment threshold is the income level at which you must start repaying your HECS debt.
For the 2024-25 year, you started making compulsory repayments once you earned over $54,435. The minimum repayment income threshold for the 2024-25 financial year to start making loan repayments is set at $54,435, up from $51,550 in 2023-24. Once your income exceeds the compulsory repayment threshold, you will start repaying your HECS debt through the tax system.
However, as of July 1, 2025, the minimum repayment threshold will increase to $67,000. That’s a $12,565 increase, which is huge for early-career graduates. Paying HECS begins automatically once your income surpasses the threshold.
Even better? The new system only taxes the income above $67,000. Let me illustrate this with real numbers. The amount of HECS you will need to repay depends on your income bracket, with higher incomes requiring higher repayment rates.
Employers may also withhold extra tax from your salary to cover compulsory HECS repayments once you exceed the threshold.
Real-World Calculation Examples
Example 1: Earning $70,000 in 2025-26
Under the old system (2024-25), if you earned $70,000, you’d pay 2.5% of your entire income toward HECS. The compulsory repayment for an income of $70,000 in the 2024-25 financial year is 3.0% of income. HECS debt repayments are calculated based on your income tax return and are managed by the ATO as part of your overall debt repayments.
- Repayment: $70,000 × 2.5% = $1,750
Under the new marginal system (from July 2025), you only pay 15% on the income over $67,000:
- Income above threshold: $70,000 – $67,000 = $3,000
- Repayment: $3,000 × 15% = $450
That’s a saving of $1,300 per year just from the policy change.
If your employer is instructed to withhold amounts for your HECS debt, help repayments are automatically deducted from your salary through the payroll system.
Example 2: Earning $80,000 in 2025-26
- Income above threshold: $80,000 – $67,000 = $13,000
- Repayment: $13,000 × 15% = $1,950
Compare this to the old system, where you’d have paid about $3,200 (4% of $80,000). These help repayments are determined by your income tax obligations and are processed as part of your annual income tax assessment.
Example 3: Earning $130,000 in 2025-26
For higher earners above $125,000, the rate increases to 17% on income above that threshold:
- First bracket: ($125,000 – $67,000) × 15% = $8,700
- Second bracket: ($130,000 – $125,000) × 17% = $850
- Total repayment: $9,550
Employers may be required to withhold amounts from your wages to cover compulsory HELP repayments, which are then sent to the ATO as part of your debt repayments.
The Big News: 20% Debt Reduction When You Pay HECS Debt
Here’s something that might make your day: if you had HECS debt on June 1, 2025, the government automatically wiped 20% of it.
Let’s say you had $30,000 in debt. On June 1, before the annual indexation kicked in, the ATO reduced it by $6,000. Your new balance: $24,000.
The average Australian with HECS debt had around $27,600 and received approximately $5,520 knocked off. That’s real money that’ll speed up your repayment timeline.
When will you see this? The ATO started processing these reductions in mid-October 2025, and everyone should see their adjusted balance by mid-December at the latest. You’ll receive a text or email from the ATO when your payment is processed. On November 3, 2024, the Australian Government announced a 20% reduction on all HELP debts, which will be implemented before June 1, 2025.
Understanding Indexation (The Sneaky Debt Grower)
HECS debt doesn’t charge interest, but it does increase through indexation every June 1st. Think of it like your debt keeping pace with inflation. HECS-HELP debt is indexed annually on June 1 to reflect changes in the cost of living; this means the total debt increases each year unless repayments are made.
For 2025, the indexation rate is 3.2%. So if you had $40,000 sitting there unpaid:
- Indexation increase: $40,000 × 3.2% = $1,280
That’s an extra $1,280 added to your debt just for holding it for a year. This is why paying it off faster can save you real money.
Compare this to recent years:
- 2024: 4.0% (revised down from 4.7%)
- 2023: 3.2% (revised down from a massive 7.1%)
- 2022: 3.9%
Why You Might Want to Pay Off HECS Debt Faster
Beat the Indexation Game
Every dollar you pay off before June 1st is a dollar that won’t get indexed. Making voluntary payments can help you pay off your HECS debt early and reduce the impact of indexation.
These strategies can help you achieve a balance faster and minimize the total amount paid.
If you’re sitting on $50,000 and indexation is 3.2%, you’re looking at $1,600 added to your balance annually if you don’t make extra payments. Regularly checking your HECS-HELP loan balance through the ATO’s online services can help you track your progress.
Boost Your Borrowing Power
Banks don’t love HECS debt when you’re applying for a home loan. While it doesn’t appear on your credit report, lenders factor it into their serviceability calculations. The less HECS debt you have, the more money banks think you can borrow.
Mental Freedom
There’s something liberating about not having that debt hanging over you. Many Australians describe paying off their HECS as a massive weight lifted – it’s not just financial, it’s psychological.
Help Loan Options: What Are Your Choices?
When it comes to managing your HECS-HELP debt, it’s important to know the different help loan options available to you. The Australian Government offers several types of HELP loans, but when it comes to repayment, you have two main pathways: compulsory repayments and voluntary repayments.
Compulsory repayments are automatically triggered once your income exceeds the minimum repayment threshold for the financial year. For 2024-25, this threshold is $54,435, and it’s set to rise in future years. The Australian Taxation Office (ATO) will calculate and collect these repayments through the tax system, so you don’t need to worry about missing a payment if your income is above the threshold.
On the other hand, you can make voluntary repayments at any time, regardless of your income. Voluntary repayments are a powerful way to pay off your HECS debt sooner and reduce the impact of annual indexation. Even small additional repayments throughout the year can make a big difference to your overall debt repayment timeline.
The ATO website offers a handy repayment calculator to help you estimate your compulsory and voluntary repayment amounts based on your income. By using these tools and making additional repayments when possible, you can take control of your HECS-HELP debt and work towards financial freedom faster. If you’re unsure about the best approach for your situation, it’s always wise to seek advice from a financial expert to tailor a repayment strategy that aligns with your goals.
Managing Annual Income for Debt Repayment
Effectively managing your annual income is key to staying on top of your HECS debt and reaching your financial goals. Your compulsory repayment amount is determined by your repayment income, which includes your taxable income and certain other income sources. The Australian Taxation Office (ATO) uses this figure to apply the relevant repayment rate, which can range from 1% to 10% of your income, depending on how much you earn. Learn more about PAYG Instalments and how they impact your tax obligations.
To make the most of your debt repayment strategy, it’s important to understand how changes in your annual income can affect your compulsory repayment obligations. The ATO’s online services make it easy to estimate your repayment income and see how different income scenarios might impact your repayments. This can help you plan ahead, especially if you’re considering taking on extra work, a side hustle, or a pay rise.
Making voluntary repayments on top of your compulsory payments is another smart way to pay off your HECS debt faster. By proactively managing your income and making additional repayments when you can, you’ll reduce your overall debt and move closer to your financial goals. Remember, every extra dollar you put towards your HECS debt is a step towards financial freedom.
Improving Your Credit Score with HECS Debt
While HECS debt itself doesn’t appear on your credit report, paying it off can still have a positive impact on your overall financial situation and credit rating. By making timely compulsory repayments and choosing to make voluntary repayments, you demonstrate responsible financial management—something lenders look for when assessing your borrowing capacity for future loans.
The Australian Taxation Office (ATO) keeps a record of your repayment history, and reducing your HECS debt can free up your income for other financial goals, such as saving for a home or investing in your future. As your HECS balance decreases, you’ll have more flexibility in your budget, which can improve your financial freedom and make it easier to achieve your long-term objectives.
Making voluntary repayments is a proactive way to manage your debt and show that you’re committed to financial responsibility. By staying on top of your HECS debt and managing your repayments effectively, you’ll put yourself in a stronger position to pursue other financial opportunities and improve your overall creditworthiness.
Smart Strategies for How to Pay Off HECS Debt
Make Voluntary Repayments
The simplest approach? Just pay extra. Making repayments on your HECS-HELP loan can be done through various methods, including direct credit via the ATO’s online services. You can make voluntary payments anytime through your myGov account linked to the ATO.
Strategic timing matters: Voluntary payments can be applied directly to your HECS-HELP loan to reduce your balance. Make lump sum payments before June 1st to avoid that year’s indexation on the amount you’re paying off. If you pay $10,000 in May instead of July, you save that money from being indexed.
Even small extra payments add up. An extra $100 per fortnight ($2,600 annually) on a $30,000 debt can shave years off your repayment timeline.
Redirect Your Savings from the New Threshold
Remember that $1,300+ you’re saving from the new repayment threshold? Instead of spending it, redirect it straight to voluntary HECS payments. You won’t miss money you never had in your budget, and you’ll accelerate your debt payoff significantly.
Use Windfalls Wisely
Tax refunds, work bonuses, inheritance money – these one-off amounts can make a serious dent in your HECS balance. A $5,000 tax refund put toward HECS could save you $160-$350 in indexation (depending on rates) over the next few years.
Budget Reallocation
Look at your monthly expenses and find $50-200 you can consistently redirect. Maybe it’s one less meal delivery per week, cancelling subscriptions you don’t use, or putting your coffee money toward the debt. It all makes a difference.
Increase Income Streams
Side hustles, freelance work, or asking for a raise – any extra income can be funnelled toward HECS if that’s your priority. Just remember that all income counts toward your repayment threshold, so factor that in.
Common Mistakes to Avoid When Paying Off HECS Debt
Mistake #1: Not Telling Your Employer When Your Debt Is Paid
This is surprisingly common and costs Australians hundreds (sometimes thousands) every year.
When you complete your tax file number declaration with your employer, you tick a box saying you have a HECS debt. Your employer then withholds extra money every pay cycle. When you are earning a salary from an employer, repayments will automatically be made towards your HECS debt on your behalf.
However, salary packaging arrangements and certain fringe benefits can affect the amount your employer withholds for HECS repayments, as these can increase your assessed income and impact how much is deducted. But here’s the catch: they won’t automatically stop when your debt is paid off.
You need to submit a new withholding declaration to your payroll department as soon as your debt hits zero. Otherwise, you’ll keep having money taken from your pay for a debt that doesn’t exist. Once a borrower pays off their HECS debt, they need to inform their employer by submitting a new ‘withholding declaration’ form to stop deductions.
How to fix it: Check your HECS balance regularly through myGov. When it’s paid off, immediately notify your employer in writing. If you’ve overpaid, the ATO will refund you through your next tax return, but you’ll be out of pocket until then.
Mistake #2: Taking On Other Debt While You Have HECS
Many recent graduates think “HECS doesn’t count as real debt” and take out car loans, credit cards, or personal loans without considering the full picture.
Here’s the problem: when you earn over the threshold, the ATO doesn’t care about your car payment or credit card bill. They calculate your HECS repayment based purely on your income. If you’re stretched thin paying commercial debts, you might struggle when that HECS repayment hits.
Better approach: Prioritise paying off high-interest debt first (credit cards at 20% interest should absolutely come before HECS at 3.2% indexation). But avoid taking on new consumer debt until you’ve cleared your HECS or at least reduced it significantly.
Mistake #3: Not Checking Your Balance Regularly
Set-and-forget is dangerous with HECS debt. The indexation rate changes yearly, your balance increases, and policy changes happen (like the recent 20% reduction).
What to do: Log into myGov and check your ATO account at least twice a year. June is crucial (that’s when indexation hits), and again after you lodge your tax return. This takes five minutes and helps you stay on top of your debt.
Mistake #4: Paying Off HECS While Carrying High-Interest Debt
Yes, we want to tackle HECS debt. But mathematically, if you’re paying 18-22% interest on a credit card while making extra HECS payments on debt that grows at 3.2%, you’re losing money.
The smart order:
- Build a small emergency fund ($2,000-3,000)
- Pay off high-interest consumer debt (credit cards, personal loans)
- Consider your HECS payoff vs. other goals (home deposit, investing)
- Then accelerate HECS payments if it makes sense for your situation
Mistake #5: Not Understanding the New Marginal System
Some people still think they’ll pay a percentage of their entire income once they hit $67,000. This isn’t true anymore (as of July 1, 2025).
You only pay 15% on income above $67,000. If you earn $68,000, your repayment is 15% of $1,000 ($150), not 15% of $68,000 ($10,200). Big difference.
Understanding this helps you budget accurately and avoid overpaying through employer withholding.
Mistake #6: Making Large Voluntary Payments in July
Indexation happens on June 1st every year. If you’re planning to make a lump sum payment, make it in May before indexation, not in July after.
Example: You have $40,000 debt and want to pay $10,000.
- Pay in May: You pay $10,000, leaving $30,000 to be indexed (grows by $960 at 3.2%)
- Pay in July: The full $40,000 gets indexed first (grows by $1,280), then you pay $10,000
By timing it right, you save $320 from indexation.
Is It Actually Worth Paying Off HECS Early?
This depends entirely on your personal situation. Here are some scenarios:
Pay it off faster if you:
- Have no other debt
- Have a solid emergency fund
- Aren’t saving for a house deposit in the next 2-3 years
- Value being debt-free psychologically
- Expect indexation to remain moderate (3-4%)
Take your time if you:
- Have high-interest consumer debt to clear first
- Are saving for a house deposit
- Have great investment opportunities with returns above 3-4%
- Have irregular income and need cash flow flexibility
It’s worth noting that HECS repayments are not tax-deductible. However, some self-education expenses related to your income may be tax-deductible.
Remember, HECS is the cheapest debt you’ll probably ever have. It’s interest-free (just indexed), income-contingent (you only pay when you can afford it), and written off if you die.
How to Make a Payment
Making voluntary HECS payments is straightforward:
- Log into myGov and access ATO online services, which you can reach through the Australian Taxation Office website
- Navigate to “Make a payment” and select “HELP debt”
- Choose your payment method (BPAY, direct debit, or card)
- Payments processed within 2-5 business days
You can make payments at any time – weekly, monthly, or whenever you have spare cash. There are no fees or penalties for irregular expenses. Making voluntary repayments can also increase your available loan limit for future study.
Key Takeaways
- The minimum repayment threshold is now $67,000 (up from $56,156), saving most graduates $1,000+ annually
- A 20% debt reduction was applied on June 1, 2025, with balances updating through to December 2025
- Only income above $67,000 is subject to repayments at 15% under the new marginal system
- 2025 indexation sits at 3.2%, adding around $960 to a $30,000 debt if left unpaid
- Strategic timing of voluntary payments (before June 1) maximises your impact
- Check your balance regularly and notify your employer when your debt is paid off
- The HECS-HELP repayment rates vary based on your income, starting at 1% for those earning between $54,435 and $62,850, and increasing to 10% for those earning $159,664 and above.
Frequently Asked Questions
Can I pay off my child’s HECS debt?
You may also be interested in learning how to set up a payment plan with the ATO for managing tax debts.
Absolutely. Parents can make voluntary payments on behalf of their children through the ATO portal. You’ll need their tax file number to ensure payments are correctly allocated to their account.
Does HECS debt ever get written off?
HECS debt is cancelled when you die – that’s the only automatic forgiveness. There’s no time limit or statute of limitations otherwise. If you move overseas, you’re still required to make repayments once your worldwide income exceeds the threshold.
What happens to my HECS if I move overseas?
You still need to repay it based on your worldwide income. Lodge an overseas travel notification with the ATO and continue meeting your obligations. The ATO can pursue overseas debt through various channels. Voluntary repayments can be made at any time to reduce your HECS debt, but they do not offset the compulsory repayment amount you must pay if you earn above the threshold.
You still need to repay it based on your worldwide income. Lodge an overseas travel notification with the ATO and continue meeting your obligations. The ATO can pursue overseas debt through various channels.
How do I check my current HECS balance?
Log in to myGov, click the link to ATO online services, and your current balance appears on your dashboard. Your Notice of Assessment, after lodging your tax return, also shows your updated debt amount, including indexation and any payments made.
Should I pay off HECS or invest instead?
This is the million-dollar question. If you can consistently earn 6-8% returns through diversified investments while indexation sits at 3.2%, investing might provide better long-term outcomes. However, the guaranteed “return” of avoiding indexation plus the psychological benefit of being debt-free are valuable considerations. Many financial advisors suggest splitting the difference – make moderate extra HECS payments while also building investments.
Can I make payments fortnightly instead of annually?
Yes! You can make voluntary payments as frequently as you like – weekly, fortnightly, monthly, or as lump sums. The ATO processes them all the same way. Many people find setting up regular, smaller payments easier than saving for one large payment.
Will paying off HECS improve my credit score?
HECS debt doesn’t appear on your credit report, so paying it off won’t directly improve your credit score. However, it will improve your borrowing capacity with lenders, as banks won’t need to factor those repayments into their serviceability calculations.
Are self-education expenses tax-deductible if I have a HECS debt?
Self-education expenses can be tax-deductible if the study is directly related to your current employment and meets the ATO’s criteria. However, claiming self-education deductions does not reduce your HECS compulsory repayment amount. Your HECS repayment is calculated on your total taxable income before these deductions are applied, so while you may receive a tax benefit, it won’t lower your HECS repayment for the year.
