If you have a HECS-HELP (or other HELP) debt, the 2025-26 financial year brought the biggest overhaul of student loan repayments in years. The HECS repayment threshold for 2025-26 is $67,000 of repayment income — a big jump from the previous $56,156 — and compulsory repayments are now calculated on a marginal system, like income tax brackets. On top of that, a 20% reduction was applied to outstanding HELP debts in 2025.
In this guide we break down exactly what changed, the new rates and thresholds, worked examples showing how much you will repay at different incomes, and what you need to do (spoiler: probably nothing). To get a personalised figure, calculate your exact repayment with our free HECS calculator.
What Changed for HECS Repayments in 2025-26?
Three major changes took effect from 1 July 2025, and together they mean most graduates repay less than before:
- Higher threshold: compulsory repayments now start at $67,000 of repayment income, up from $56,156 in 2024-25. Earn below $67,000 and you pay nothing.
- New marginal repayment system: instead of paying a flat percentage of your entire income once you crossed the threshold, you now pay only on the income above $67,000 — just like tax brackets. This removes the harsh cliff edge where earning $1 extra could cost you hundreds in repayments.
- 20% debt reduction: in 2025 the government wiped 20% off all outstanding HELP debts automatically, before the annual indexation was applied.
The 2025-26 HECS Repayment Threshold and Rates
The HECS repayment threshold 2025-26 is $67,000. If your repayment income is $67,000 or less, your compulsory repayment is nil. Above that, the new marginal rates apply:
| Repayment income | Compulsory repayment |
|---|---|
| $0 – $67,000 | Nil |
| $67,001 – $125,000 | 15c for each $1 over $67,000 |
| $125,001 – $179,285 | $8,700 plus 17c for each $1 over $125,000 |
| $179,286 and over | 10% of your total repayment income |
The key difference from the old system: under the pre-2025-26 rules, crossing the threshold meant a percentage of your whole income became payable. Now, like income tax, each band only taxes the slice of income inside it. The result is lower repayments for most borrowers and no more nasty surprises from a small pay rise.
What Counts as “Repayment Income”?
The threshold is based on your repayment income, which is broader than just taxable income. It is calculated as:
- Your taxable income for the income year, plus
- Reportable fringe benefits (shown on your income statement), plus
- Reportable superannuation contributions (including salary sacrifice), plus
- Any net investment losses (for example, negatively geared rental losses), plus
- Any exempt foreign employment income.
This matters because salary-sacrificed super and fringe benefits can push you over the $67,000 threshold even if your taxable income looks lower. If you are unsure where you stand, run your figures through our income tax calculator alongside your HECS estimate.
Worked Examples: How Much Will You Repay?
Let’s see the new marginal system in action with three common income levels.
Example 1: $75,000 repayment income
Your income above the $67,000 threshold is $75,000 − $67,000 = $8,000. At 15c per dollar:
$8,000 × 15% = $1,200 per year (about $46 per fortnight).
Example 2: $80,000 repayment income
Income above the threshold: $80,000 − $67,000 = $13,000.
$13,000 × 15% = $1,950 per year (about $75 per fortnight).
Under the old whole-of-income system this same person would have paid roughly $2,800 — so the new rules save around $850 a year at this income level.
Example 3: $100,000 repayment income
Income above the threshold: $100,000 − $67,000 = $33,000.
$33,000 × 15% = $4,950 per year (about $190 per fortnight).
These are compulsory repayments only — they are separate from your income tax and Medicare levy, but they are collected through the same tax system. Want your exact number for any salary? Calculate your exact repayment in seconds.
The 20% HELP Debt Reduction Explained
In 2025, the government applied a 20% reduction to all outstanding HELP debts (including HECS-HELP, FEE-HELP, SA-HELP, VET Student Loans and others). Key points:
- Automatic: you did not need to apply. The ATO reduced your balance directly.
- Timing: the reduction was applied to your debt balance before the 2025 indexation, so you got the full benefit of the cut.
- Size of the saving: the average HELP debt of around $27,600 was reduced by roughly $5,520. A $10,000 debt became $8,000; a $40,000 debt became $32,000.
- Check your balance: log in to myGov, link it to the ATO, and view your current HELP balance under your loan accounts.
If you had already fully repaid your debt before the reduction was applied, there is no retrospective payment — the cut only applied to debts still outstanding at the time.
HECS Indexation: No Interest, but Your Balance Still Grows
HECS-HELP debts do not charge interest. Instead, the outstanding balance is indexed each year on 1 June to keep pace with inflation. For 2025 the indexation rate was 3.2%.
How indexation works in practice:
- Indexation is applied to your unpaid balance as at 1 June each year.
- Because of the 2025 reforms, the 20% reduction was applied first, and then 3.2% indexation was calculated on the reduced balance — a double win for borrowers.
- Compulsory repayments you make through the tax system reduce the balance that future indexation applies to, so higher repayments now mean less indexation later.
Indexation is not a repayment — it does not reduce what you owe. Only compulsory repayments (via tax) and voluntary repayments bring the balance down.
How HECS Repayments Are Collected
You do not send a separate payment to the ATO for your compulsory HECS repayment. It is collected automatically through the tax system:
- Tick the box on your TFN declaration. When you start a job, tell your employer you have a HELP debt by answering “yes” on the Tax File Number declaration form. Your employer will then withhold extra amounts from each pay to cover your expected HECS repayment.
- Extra withholding each payday. This extra withholding is based on your expected annual income. It is not an extra tax — it is a prepayment of your compulsory HECS repayment.
- Reconciled at tax time. When you lodge your tax return, the ATO calculates your actual compulsory repayment from your repayment income and credits the amounts your employer withheld. If too much was withheld, the excess is refunded to you. If too little was withheld, the shortfall is added to your tax bill.
It is always better to have slightly too much withheld than too little — a refund beats a surprise tax bill. If you change jobs or your income changes significantly during the year, update your withholding declaration so the withheld amounts stay on track.
Should You Make Voluntary Repayments?
On top of compulsory repayments, you can make voluntary repayments toward your HELP debt at any time via BPAY or credit card through the ATO. There is currently no discount for voluntary or upfront payments — the old discounts were removed years ago — so a voluntary repayment reduces your balance dollar-for-dollar, nothing more.
Whether voluntary repayments make sense depends on your situation:
- Reasons to pay extra: you want the debt gone faster (for example, before applying for a home loan, since HELP repayments reduce your borrowing capacity), or you simply dislike carrying the debt.
- Reasons not to: HELP debt is the cheapest debt you will ever hold — no interest, only indexation, and it dies with you (it is not passed to your estate). Money used for voluntary repayments might work harder in an offset account, super, or investments. Also, if your income is below $67,000 you are not required to repay anything at all.
There is no right answer for everyone — but do not make voluntary repayments expecting a discount, because there isn’t one.
Frequently Asked Questions
What is the HECS repayment threshold for 2025-26?
The HECS repayment threshold for 2025-26 is $67,000 of repayment income. If you earn $67,000 or less, your compulsory repayment is nil. Above $67,000, the new marginal rates apply: 15c per dollar over $67,000 up to $125,000, then $8,700 plus 17c per dollar over $125,000 up to $179,285, and 10% of total repayment income above $179,286.
How is the new marginal HECS system different from the old one?
Before 2025-26, once your income crossed the threshold you paid a flat percentage of your entire income — so earning $1 extra could trigger hundreds of dollars in repayments. From 2025-26, repayments work like tax brackets: you only pay the rate on the income above each threshold. Most borrowers now repay less than under the old system.
Do I need to do anything to get the 20% HECS debt reduction?
No. The 20% reduction was applied automatically by the ATO in 2025 to all outstanding HELP debts, before indexation. You can verify your reduced balance through myGov linked to the ATO.
Does HECS debt affect my take-home pay?
Yes. If your repayment income exceeds $67,000, your employer withholds extra from each pay once you declare your HELP debt on your TFN declaration form. For example, on an $80,000 income you would repay about $1,950 for the year — roughly $75 per fortnight less in your pocket. Use our HECS calculator to see your exact figure.
What happens if I don’t tell my employer about my HECS debt?
If you don’t declare your HELP debt, your employer won’t withhold the extra amounts — but you will still owe the compulsory repayment when you lodge your tax return. That usually means an unexpected tax bill at the end of the year. Always declare it and let the withholding happen gradually.
Is HECS indexed, and is there interest on HECS?
There is no interest on HECS-HELP debt. However, the balance is indexed annually on 1 June to inflation — 3.2% in 2025. Indexation increases what you owe but is not a repayment; only compulsory and voluntary repayments reduce your balance.
The Bottom Line
The 2025-26 changes are good news for graduates: a $67,000 HECS repayment threshold, a fairer marginal repayment system that only charges you on income above the threshold, and a 20% cut to existing debts. If you earn under $67,000 you pay nothing; if you earn more, your repayment is easy to estimate — 15% of everything above $67,000 covers most people.
To see exactly what you’ll repay on your salary — including how it affects your take-home pay each fortnight — calculate your exact repayment with our free HECS repayment calculator.