If the last thing you heard about HECS-HELP repayments was "it's a flat percentage of your income once you cross a threshold," that changed on 1 July 2025 — and the change is a genuinely big improvement for anyone with a student loan balance.
The old system had a cliff-edge problem
Before the reform, crossing a repayment threshold meant a single rate applied to your entire income — not just the amount above the threshold. Earning one dollar over a bracket boundary could trigger hundreds of dollars in extra compulsory repayment, the same way stepping over a cliff edge does more damage than a gentle slope. This discouraged overtime, bonuses, and pay rises near threshold boundaries.
The new marginal system, effective 2025-26
| Income range | Repayment rate |
|---|---|
| Up to $67,000 | Nil |
| $67,000 – $125,000 | 15% of income above $67,000 |
| $125,000 – $179,285 | $8,700 + 17% of income above $125,000 |
| $179,286 and above | 10% of total income |
The bottom two brackets now work exactly like income tax brackets — you only pay the higher rate on the slice of income within that band. The top bracket is the one exception: above $179,286, the rate reverts to a flat 10% of your entire income, to ensure high earners still make a substantial repayment.
Worked example
Someone earning $80,000 pays 15% only on the $13,000 above the $67,000 threshold — a compulsory repayment of $1,950 for the year. Under the old system, crossing a lower threshold at a similar income could have meant paying a flat rate on the full $80,000, resulting in a noticeably larger bill.
The threshold is indexed each year
The $67,000 threshold applied for the 2025-26 income year. It's indexed annually — for 2026-27, it rose to $69,528. Expect it to keep climbing each year in line with wages.
Estimate your compulsory HECS-HELP repayment.
Use the HECS-HELP Calculator →The one-off 20% debt reduction
Separately from the repayment system change, the government applied a one-off 20% reduction to every outstanding HELP debt balance that existed on 1 June 2025, before that year's indexation was applied. This was a balance reduction, not a repayment — it lowered what people owed in total, on top of the new, gentler repayment structure.
Indexation still applies annually
HECS-HELP carries no interest, but the outstanding balance is still indexed each 1 June to keep pace with the cost of living. Since 2023, indexation is capped at whichever is lower: the Consumer Price Index (CPI) or the Wage Price Index (WPI) — a change introduced specifically to prevent a repeat of the sharp 7.1% indexation spike that would otherwise have applied in 2023.
Should you make voluntary repayments?
Because HECS-HELP charges no real interest — only indexation, capped at the lower of CPI or WPI — the case for paying it off early purely to "save on interest" is weaker than for a typical loan. Many financial advisers suggest comparing the expected after-tax return of investing extra money elsewhere against the modest indexation rate before deciding to make voluntary repayments.
Repayment thresholds are indexed annually and could be subject to further legislative change. Confirm current figures with the ATO or Study Assist before relying on them for financial planning.