Should You Pay Off Your HECS-HELP Debt Early? A Plain-English Guide for 2026–27

General information only. This article doesn't take into account your objectives, financial situation or needs, and isn't financial, tax or credit advice. Consider whether it's appropriate for you and, where relevant, read the PDS and TMD and talk to a licensed financial adviser or registered tax agent. Figures were checked against official sources on the date shown and can change.

"Should I pay off my HECS early?" is one of the most common money questions young Australians ask, and the rules have changed a lot recently. A 20% cut to balances, a new marginal repayment system and lower indexation have all changed the maths.

This guide explains how HELP debt works in 2026–27, using figures from the ATO and the Department of Education, then walks through the questions that usually decide whether extra repayments make sense. It's general information, not a recommendation. The right answer depends on your income, other debts, savings and plans.

HECS vs HELP: same thing, new name

HECS was the original name. The scheme has been called the Higher Education Loan Program (HELP) for years, and the debt is often called "HECS-HELP". The ATO groups it with other study and training loans, such as VET Student Loans and Australian Apprenticeship Support Loans, and similar rules apply to most of them.

How HELP indexation works

A HELP debt doesn't charge interest the way a credit card or personal loan does. Instead, according to the ATO, on 1 June each year indexation is applied to the part of your debt that has been unpaid for more than 11 months. Indexation adjusts the debt in line with the Consumer Price Index (CPI) or the Wage Price Index (WPI), whichever is lower. The idea is to keep the debt's real value roughly the same over time.

Here are the most recent rates published by the ATO:

The "previously" figures are there because the government later capped indexation at the lower of CPI and WPI and backdated the change, so the 2023 and 2024 rates were reduced. The next indexation date is 1 June 2027, and the rate won't be known until early 2027.

The 20% cut

Legislation passed in July 2025 reduced HELP and other student loan balances by 20%. The Department of Education says it applied to balances as at 1 June 2025, before that year's indexation, with the 2025 indexation recalculated on the lower amount. The ATO has since said it has finished processing the reduction for all eligible debts. If you had a debt on that date, you didn't need to do anything. You can check your updated balance in myGov linked to the ATO.

How compulsory repayments work in 2026–27

From the 2025–26 income year, compulsory repayments moved to a marginal system: you only repay on income above the minimum threshold, not on your whole income. The ATO's thresholds for 2026–27 are:

A few things to know:

• Repayment income isn't just your salary. It's your taxable income plus certain other amounts, such as reportable fringe benefits, net investment losses, reportable super contributions and exempt foreign employment income.
• It's collected through the tax system. If you tell your employer you have a study loan, extra tax is withheld from your pay. Your actual repayment is worked out when you lodge your tax return.
• Moving overseas doesn't make it disappear. If you live overseas, you may still have repayment obligations. Check the ATO's study loan pages before you go.

You can use the ATO pages linked below to check the current thresholds, as they're indexed every year.

Voluntary repayments: the rules

• You can make a voluntary repayment to the ATO at any time, of any amount.
• There's no bonus or discount for paying early.
• To stop indexation applying to that money, the ATO needs to receive and process it before 1 June. Leave time for processing.
• Voluntary repayments are on top of compulsory repayments. They don't reduce the compulsory amount due for that year.

See the ATO's voluntary repayments page for payment options.

So, should you pay it off early?

There isn't one answer, but working through these questions in order covers what matters for most people.

1. Do you have high-interest debt?

Credit cards, personal loans, buy now pay later arrears and payday loans usually cost far more than HELP indexation. Paying those off first usually saves more money. Moneysmart has guides on how to pay off a credit card.

2. Do you have an emergency fund?

Money paid to the ATO is gone. You can't get it back if your car breaks down. Many people build a cash buffer before making extra HELP repayments. Our emergency fund guide explains how much you might need.

3. What else could that money do?

Compare the indexation rate with what your money could save or earn elsewhere, after tax. If you have a home loan, money in an offset account reduces interest at your home loan rate. Savings accounts pay interest, but it's taxable. Investing in shares or super may grow over the long term, but returns aren't guaranteed and can be negative. Keep in mind that indexation changes every year, so a gap that exists today may not exist next year.

4. Are you planning to borrow soon?

Lenders generally take your compulsory HELP repayments into account when working out how much you can afford to borrow. Paying the debt off completely may change that picture, while a partial repayment may not change it much. If a home loan is on the horizon, ask a lender or licensed mortgage broker how your HELP balance affects your situation before you make a big voluntary repayment.

5. How close are you to finishing?

If your balance is small, clearing it might simplify your finances, end the extra withholding from your pay and give you a psychological win. Some people value being debt-free for its own sake, and that's a legitimate reason too.

6. How will your income change?

If you expect to earn below the threshold for a while, for example during further study, parenting or part-time work, compulsory repayments may pause while indexation continues. If you expect your income to rise sharply, compulsory repayments will rise with it. Either way, the ATO's thresholds table helps you estimate.

A simple way to decide

For many people, a sensible default looks like this:

1. Pay off high-interest debt.
2. Build an emergency fund.
3. Then compare HELP with your other goals, such as a home deposit, offset, investing or extra super, based on rates, timing and how you feel about debt.

If you do decide to make extra repayments, aim to have them processed well before 1 June so they reduce the balance that gets indexed.

If you're unsure how a voluntary repayment fits with your tax, borrowing plans or other goals, a registered tax agent or licensed financial adviser can help with your specific situation.

Frequently asked questions

Does HECS-HELP debt charge interest?

No, HELP debts don't charge interest in the usual sense. Instead, on 1 June each year the ATO applies indexation to the part of your debt that has been unpaid for more than 11 months. Indexation is the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). The rate applied on 1 June 2026 was 2.8%.

What is the HELP repayment threshold for 2026–27?

For the 2026–27 income year, the ATO's minimum repayment threshold is $69,528 of repayment income. Since 2025–26, compulsory repayments are worked out using marginal rates, so you only repay on income above the threshold: 15 cents for each dollar between $69,529 and $129,717, then $9,028 plus 17 cents per dollar up to $186,050, and 10% of total repayment income above that.

Do voluntary HECS repayments get a discount or bonus?

No. There's no bonus or discount for voluntary repayments. To reduce the amount indexation applies to, a voluntary payment needs to be received and processed by the ATO before 1 June. Voluntary repayments are on top of, and don't reduce, your compulsory repayment for the year.

Did my HELP debt get cut by 20%?

If you had a HELP or other student loan debt on 1 June 2025, the government reduced it by 20%, applied before that year's indexation. The ATO says it has completed processing these reductions. You can check your balance through myGov linked to the ATO.

Sources

Checked on 10 October 2026. Official sources are updated regularly, so follow the links for the latest figures.

1. ATO: Study and training loan indexation rates
2. ATO: Study and training loan repayment thresholds and rates
3. ATO: Study and training loans: what's new (20% reduction, marginal repayments)
4. ATO: Voluntary repayments
5. Department of Education: Legislation to reduce student loan debt by 20% passes Parliament
6. Study Assist: Checking your HELP debt
7. Study Assist: Loan repayments
8. Moneysmart: Credit cards: pay off your credit card
9. Moneysmart: Mortgage offset accounts