How HECS-HELP debt works in 2026

For most people, a student loan is something you sign up for at 18 and then don't think about for years. It sits in the background through uni and the part-time jobs around it, until you start your first full-time job and it begins coming out of your pay, before the money ever reaches you.

Usually the next time you think about it is when something looks wrong. Maybe there's a deduction on your payslip you didn't expect. You might have logged in to myGov and found the balance had gone up in June, after a whole year of money coming out of every pay, or read about the government's 20% cut and found your balance still looks an awful lot like the old one. If any of that has left you wondering whether you're being quietly ripped off, you're not, and you're far from the only person confused by it.

Most of the confusion comes from three numbers that are easy to mix up: what you owe, what you repay each year, and what comes out of each pay. They're worked out in different ways and they move on different days. What I'd like to do in this article is pull them apart, so you can open your own loan account, know what each entry means, and tell whether there's anything you need to do.

The loan in a few lines

Most people call it HECS, and its full name is HECS-HELP. In most undergraduate courses the government pays part of your fees, and the loan covers the rest, your share, which is paid straight to the uni so you never see a bill (Study Assist).

It works differently from any other debt you're likely to have. You don't repay it on a schedule, because the Australian Taxation Office (ATO) collects it through the tax system once your income for the year passes a threshold, a line that's reset every year. It doesn't charge interest either. Instead, the balance is adjusted once a year to keep up with rising prices, which is called indexation, and it's the reason the balance can go up in June (more on that below).

How much comes out of your pay

What you repay is worked out from your income alone. For 2026–27 the threshold is $69,528, and once your income for the year passes it, you repay 15 cents of every dollar above it (HELP thresholds). Because only the part above the threshold counts, the repayment starts very small and grows as your pay does. Your balance plays no part in the sum, which surprises most people: someone who owes $10,000 and someone who owes $60,000 repay exactly the same on the same income.

Example: the 2026–27 thresholds

Only the dollars above $69,528 count

Repayments start$69,528

$60,000$0 a yearnothing to repay

$75,000$820 a yearabout $16 a week

$90,000$3,070 a yearabout $59 a week

15c of each dollar here

$150,000$12,480 a yearabout $240 a week

17c of each dollar above $129,717

$0$50,000$100,000$150,000

For the money to come out of your pay, your employer needs to know about the loan. When you start a job you fill in a tax file number declaration, the form that tells your employer how much tax to take, and one of its questions asks whether you have a study loan. If you answered yes, your employer takes a little extra from each pay once your pay is high enough (ATO). Some payslips give it its own line. Others fold it into the tax amount, which is why two people on the same salary can see different tax figures.

Because it depends on income, the loan also eases off when life gets harder. If your income for the year falls below the threshold, because you go part time, go back to study or lose a job, nothing is due for that year and the debt simply waits. The income the ATO measures has its own name, repayment income, though on an ordinary salary it works out much the same as your income for tax.

What counts as income, and how higher incomes work

Repayment income starts from your taxable income, which is your income for the year minus any tax deductions you claim, such as work expenses. It then adds back a few things, such as extra super you salary-sacrifice (pay you choose to send to super before tax), some work perks your employer reports and investment losses. On a plain salary with none of those, it's usually the same as your taxable income.

Above $129,717 in 2026–27, the next slice is repaid at 17 cents in the dollar instead of 15, and you never repay more than 10% of your repayment income in a year, or more than you owe. Some people with a spouse or dependants can repay less if their family income is low enough for a Medicare levy reduction or exemption (the Medicare levy is the charge that helps fund public healthcare). The ATO's page on compulsory repayments covers both, and the thresholds for each year are on its rates page.

For your budget, this is what I'd hold on to. The HELP your employer takes never reaches your account, so there's nothing to set aside for it. It's surprisingly easy to count it twice, once when your employer takes it and again if you list HECS as a cost in your plan. That's also why Clova starts where it does. I'd much rather you plan from the money that really lands than from a salary figure you never see in full, so Clova takes the pay that reaches your account and splits it into a few allocations, like rent and bills, food and savings. The only time HECS needs a place of its own is when nobody is taking it from your pay, which I'll come to further down.

Why the balance went up in June

This is where what you owe and what you repay really come apart, and it's easiest to see by following one loan through a real year. Mia is made up, a 24-year-old who finished a business degree a couple of years ago and rents a room in a Brisbane share house. Every rule and rate in Mia's story is real, though, and the $28,000 she owed is close to the average debt of about $27,600 the government gave when it announced its 20% cut (Department of Education). On 1 June 2025 that cut took the loan down to $22,400, just before that year's indexation was added (Cutting Student Debt Act).

A month later Mia started her first full-time job, on $75,000 a year. That's a little above the threshold, which is exactly the stretch where the loan is hardest to make sense of. The threshold for 2025–26 was $67,000 (ATO), so about $1,200 came out of Mia's pay over that year, roughly $23 a week. Then in June 2026, after all those pays, Mia logged in and found the balance higher than it had been a year earlier.

Indexation is the first reason. On 1 June each year, the part of your debt that's been there for more than 11 months goes up by the lower of two measures, the rise in prices or the rise in wages (ATO indexation rates). The idea is that the loan keeps roughly the same value over time, rather than shrinking as everything else gets more expensive. In 2026 the rate was 2.8%, which added about $650 to Mia's balance.

The other reason is timing, and it's the bit that makes the whole thing feel unfair. The money taken from your pay doesn't go onto your loan as you go. It goes to the ATO with the rest of your tax and waits there until you lodge your tax return. Only once the ATO has processed the return does it work out the year's repayment and take it off the loan in one go (ATO). So indexation arrives in June, and the repayment for the year you've just worked only lands after your return goes through, months later. It's a fairly unhelpful order if you're trying to watch the balance go down. Here's the loan from just before the cut to after that first tax return, in the order things happened to it.

Historical example: a $28,000 loan

Indexation arrives before the repayment

Balance after tax time$22,563

1. Before the cutOpening balance$28,000
2. 1 JuneOne-off 20% debt cut$22,400
   −$5,600
3. 1 JuneIndexation at 3.2%$23,116
   +$716
4. July to JuneHELP withheld from pay$23,116
   Held with your tax about $1,200
5. The next 1 JuneIndexation at 2.8%$23,763
   +$647
6. After tax timeCompulsory repayment$22,563
   −$1,200

Once the year's repayment came off, the balance was just under $22,600. About $1,200 of repayments had moved it only about $550 lower than a year before, because June's indexation had taken back half of it first. If you check your own account in June or July and it seems to be going the wrong way, look for whether last year's repayment has come off yet.

More on the 20% cut and indexation

The cut applied to debts outstanding on 1 June 2025 and happened automatically, so nobody needed to apply (ATO). Because it came off before that year's indexation and before later repayments, you won't find exactly 20% off the balance you see today, so look for it as its own entry in your loan account. Anything borrowed after that date didn't get the cut, and if you'd already paid your loan off, there was nothing to reduce. If you had a balance on the day and repaid it afterwards, the cut may have left a credit, which the ATO puts towards any other tax or government debts first and refunds the rest.

The indexation rate compares a year of quarterly price readings with the year before, does the same for wages, and uses the lower result, so it isn't simply the latest inflation headline. Mia's example uses the real rates for 2025 (3.2%) and 2026 (2.8%). Neither tells you what next June's will be.

When the balance barely moves

I'll be honest, the stretch just above the threshold is a frustrating place to be. On a starting salary, with rent where it is, handing over a slice of every pay to a debt that barely shrinks can feel like paying a subscription to it.

That's where Mia is now. For 2026–27 the threshold rose to $69,528, so on the same $75,000 the repayment fell to about $820, or $16 a week, not much more than a year of indexation adds. And because the threshold keeps rising in line with wages, pay that stays the same means a smaller repayment each year. On Mia's numbers, indexation would overtake her repayment as soon as next year, and the balance would start creeping back up.

That can sound grim, but I'd keep it in proportion. The repayment never takes more than its share of your income above the threshold, so a bigger balance can't squeeze your budget any harder. It mostly means the loan is around for longer. The system is built to take very little while your income is low, and it only starts clearing the debt in earnest once your pay climbs. You can see how quickly that changes by putting Mia's loan in the calculator, which also shows what a $15,000 pay rise would do. It holds both your pay and this year's threshold where they are. Since the threshold rises with wages, that's roughly what happens when your pay keeps up with wages too, so treat its years as a rough picture of that, not a forecast.

I'd use it to get a feel for the shape of your own loan rather than to circle a finish date, and run it again whenever your pay changes.

Side work and a bill at tax time

HECS can also turn into a surprise bill, and it's worth knowing how before it happens. Your employer only sees what it pays you, while the ATO sees your whole year. If you do freelance work or run a side business, nobody takes HELP from that money along the way, and a second job may not take enough to cover the extra it adds. All of it still counts towards your repayment.

Say Mia takes on freelance work this financial year. That income pushes Mia further above the threshold, and every dollar above it counts, but none of it has had HELP taken out. On an extra $15,000, the year's repayment ends up nearly four times what the main job has been taking, and the difference, about $2,250, is due at tax time, on top of any tax on the freelance income itself. It catches people out because nothing looked wrong all year, and then the whole amount arrives at once.

You can ask payroll to take a bit extra from each pay, or a registered tax agent can help you estimate the gap. The other way is to put a little aside yourself, about $45 a week in Mia's case. The trouble with saving for a bill that's most of a year away is how easily it slips when a week runs tight. In Clova it can be a savings goal of its own, sitting beside your rent and bills in each pay's plan with its progress and the weeks to go, so it holds its place in the tight weeks too and most of the bill is waiting for you when you lodge your return.

Should you pay it off faster?

Once people understand indexation, a lot of them want the debt gone as fast as possible. I understand the feeling, and if you have spare money and clearing the loan would take a weight off your mind, that's your call to make. I just wouldn't put it ahead of a couple of other things.

An extra payment does save some indexation, but less than you might think. At 2.8%, putting $1,000 on the loan before 1 June saves about $28 that year (ATO voluntary repayments). If you also have a credit card or a personal loan, those almost always cost far more, so I'd pay those down first. And once money goes onto your HELP loan, you can't take it back out, whereas money in an emergency fund is still there when the car breaks down, which is why I'd build a small buffer before paying extra too.

The one time I'd seriously run the numbers on paying it down is when a home loan is a year or two away. Your HELP repayments come out of your pay, so a lender may count them when working out how much it will lend, and a smaller loan or none at all could change the offer. Ask a lender or broker how your balance affects theirs before you put savings towards it, because that same money might matter more as part of a deposit.

Making an extra payment or clearing the loan

A voluntary repayment is one you choose to make straight to the ATO, on top of the compulsory one worked out from your income. Check your balance and the payment details first, and if you're aiming to get in before 1 June, pay at least a couple of weeks early. The ATO says a payment can take up to four business days to arrive and up to four more to be applied to the loan (ATO), and one that lands late misses the indexation it was meant to beat.

If you're paying off the whole thing, the ATO suggests letting the payment land on your loan before you lodge your tax return, because lodging can add a compulsory repayment on top of the one you've just made. Once it's cleared, give every employer a new withholding declaration, the form for updating what you told them on your tax file number declaration, so they stop taking extra for HELP.

Checking your balance

I'd give your loan account one proper look a year, after your tax return has been processed, because that's when everything for the year has landed and the balance finally makes sense. It lives in myGov: sign in, open the linked ATO service, then go to Tax, Accounts and Loan accounts, or start from Accounts in the ATO app (ATO). Look at the transactions as well as the balance, because that's where indexation, the 20% cut and each repayment show up as their own entries, as they do in the ledger above.

If your child is about to start uni

If you're a parent, the main thing to know is that the debt belongs to your child, and what they repay depends on their own income, not yours. HELP only covers fees, though, so rent, textbooks and everyday costs still need a plan of their own. If I were helping, that's where I'd put my money and attention, because it's the part the loan doesn't touch.

The one thing worth doing together before semester starts is putting each census date in the calendar. It's the last day to drop a subject without owing for it, and simply not turning up to class doesn't count (Study Assist), so a subject that isn't working out in week three can still be dropped without leaving a debt behind.

Living with the loan

If you're the one with the loan, it's worth remembering what it paid for: study you've already done. How quickly it goes will depend mostly on how your pay grows, and that isn't something you need to solve this week. What makes the bigger difference to how the next few years feel is the pay that lands in your account, and that's yours to plan.

Show the method and assumptions

The examples are illustrations, not a forecast or personal tax advice. Sources were checked on 28 October 2026; thresholds are for 2026–27 unless a different year is stated; the Department of Education source was checked on 31 October 2026. Mia is made up, and the timing of Mia's assessment is invented. The $27,600 average is the department's figure for debts at the time of the cut.

• Repayment examples use repayment income, not an assumed gross salary. At $75,000: ($75,000 − $69,528) × 0.15 = $820.80; divide by 52, 26 or 12 for $15.78, $31.57 or $68.40. At $90,000 the amount is $3,070.80. At $150,000: $9,028.35 + ($150,000 − $129,717) × 0.17 = $12,476.46, or $239.93 a week on average.
• The statutory first slice is ($129,717 − $69,528) × 15% = $9,028.35. The ATO's simplified table displays $9,028. The calculator retains the cents from HESA section 154-20, applies the 10%-of-income and remaining-debt caps, then rounds the annual estimate to cents. The ATO determines the final assessment.
• Mia's ledger assumes all opening debt is old enough for indexation, no new borrowing, no earlier repayments and $75,000 repayment income in 2025–26. $28,000 × 80% = $22,400. $22,400 × 1.032 = $23,116.80, reduced to $23,116 under the statutory whole-dollar accumulation rule. $23,116 × 1.028 = $23,763.248, reduced to $23,763. Subtract ($75,000 − $67,000) × 15% = $1,200 to reach $22,563. $1,200 ÷ 52 = $23.08 a week. Year on year, $23,116 − $22,563 = $553, about $550. About $1,200 is assumed withheld during July 2025 to June 2026, held with tax until assessment without changing the loan balance. The assessment date is invented.
• The calculator example uses Mia's balance after tax time, $22,563 (described as just under $22,600), with $75,000 repayment income and assumed 2.8% indexation. The first model year adds $631 (whole-dollar accumulation) and repays $820.80, leaving $22,373.20: a $189.80 fall. Held at $75,000 with 2026–27 thresholds fixed, the model takes 54 years; at $90,000, 9 years. With pay flat and thresholds rising with wages, as the prose describes, the repayment shrinks each year and eventually falls below indexation. The time-to-repay model adds assumed indexation before one annual repayment, discards accumulation cents and stops at zero. It holds repayment income and 2026–27 thresholds fixed, with no new debt or extra payments, and doesn't model exact tax-year timing, overseas levies or the low-family-income exception. The calculator holds today's thresholds and an assumed indexation rate steady, which real life won't. Only payoff estimates of 15 annual steps or fewer are shown; above that, the calculator adds $15,000 to repayment income for comparison.
• Tax-time example (2026–27): $75,000 + $15,000 = $90,000 of repayment income, so $3,070.80 is due; $3,070.80 ÷ $820.80 = 3.74 ("nearly four times"). $3,070.80 − $820.80 = $2,250, or $43.27 a week over 52 weeks, rounded up to $45 a week. The main job's withholding is assumed to match the $820.80 compulsory amount at $75,000; real payroll tables differ a little. Voluntary-payment illustration: $1,000 × 2.8% = $28, before whole-dollar accumulation effects.
• The sample Clova goal is the side-work tax-time gap: $2,250, with $900 saved at $45 a week, so ($2,250 − $900) ÷ $45 = 30 weeks to go.