A HECS-HELP debt is unlike any other loan you’ll have: it charges no interest, repayments are tied to your income rather than the balance, and it’s collected automatically through the tax system. This is how it works, and whether paying it off early is worth it.
No interest. Only indexation, and since 2023 it’s the lower of CPI and wages.
No interest, but it’s indexed
Instead of interest, your HELP balance is indexed once a year on 1 June to keep pace with the cost of living. Under the current rules, indexation is the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI)1, a change that stops indexation running ahead of wages in high-inflation years.
Repayments are income-contingent
You only repay once your income passes the annual minimum threshold. Above it, a percentage of your income is withheld through your pay and credited at tax time. From 2025-26 the system became marginal: you repay a percentage only on the income above the threshold, rather than a flat percentage of your whole income. That removes the old “cliff” where a small pay rise triggered a big jump in repayments.
The old “cliff” is gone: a pay rise no longer drags your whole income into a higher repayment rate.
Should you pay it off early?
Because there’s no interest, only indexation roughly tracking inflation, the “real” cost of a HELP debt is low. That’s why many people don’t rush to clear it: money put towards a mortgage (at 6%+) or invested for the long run often does more than paying down a debt that grows at ~CPI. The main arguments for paying it off are simplicity, freeing up take-home pay, and lenders counting your compulsory repayment against your borrowing capacity.
One timing note: because indexation hits on 1 June, a voluntary payment made before that date reduces the balance that gets indexed.
The bottom line
It’s the cheapest debt most Australians will ever hold. Understand what your compulsory repayment is, factor it into your take-home pay, and only pay extra if the maths (and your goals) clearly beat what that money could do elsewhere.
See your repayment on the marginal system, plus a payoff-time estimate, from the same engine as the app.
Open the HECS calculator →- 1 Indexation and thresholds are set by the ATO and change each year; figures here reflect the 2026-27 settings. General information only, not tax advice. Check the ATO.
Related: income tax calculator · the PFO app.