Graduates and current students in Australia face an evolving landscape when it comes to the HECS‑HELP (now part of the broader HELP loan system). With indexation rules, repayment thresholds and discounts undergoing recent reform, understanding how much the debt grows, when repayments kick in, and strategies to stay ahead is vital.
This article provides a comprehensive, clear, and up‑to‑date guide to HELP indexation as of 2026: covering how indexation works, current thresholds and repayment rates, the newly legislated changes (including a one‑off 20% reduction), and practical tips to manage or reduce student debt effectively.
How Indexation Works & Why It Matters
What is indexation for HELP debt?
Indexation is the mechanism by which HELP loans, including HECS‑HELP, are adjusted annually to maintain their real value over time. As noted by the Australian Taxation Office (ATO), indexation is applied each year on 1 June to all HELP debts that are at least 11 months old.
The rate is set at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI), ensuring that debt growth does not outpace wage growth. For example, the indexation rate applied on 1 June 2025 is 3.2%.
Why indexation matters for borrowers
Debt growth: Even if no further study is undertaken, the outstanding HELP debt grows by the indexation rate each year—meaning borrowers pay in real‑terms for their study.
Timing: Because indexation is applied before repayments, delays in repayment can increase total cost.
Reforms: Recent legislation has reduced the rate and introduced additional relief for borrowers—critical to understand for anyone with a HELP debt.
Key takeaway: Even with no new borrowings, the balance of a HELP debt will increase annually unless voluntary repayments are made—so understanding and managing indexation is essential.
Key Thresholds & Reforms for 2026
Minimum repayment income thresholds
The minimum repayment income (also called the compulsory repayment threshold) is the income level above which a HELP debt must begin to be repaid. After reforms, for the 2025‑26 income year the threshold is $67,000.
This means: if repayment income is $67,000 or less, no compulsory repayment is required. If over, repayments apply only to the income above the threshold.
Repayment rates
The new system (effective from 2025–26) sets marginal repayment rates:
For incomes above the threshold up to a higher bracket, a rate of 15 cents per dollar applies for each dollar earned above $67,000 (up to $125,000)
For incomes above $125,000, higher rates apply (e.g., 17 c per dollar above the threshold) depending on the bracket.
One‑off 20% debt reduction
Importantly, as of 1 June 2025, legislation has introduced a one‑off 20 % reduction to existing HELP debts as at that date (before indexation). The reduction is automatically applied by the ATO—borrowers don’t need to do anything.
For example, those with average debts (~$27,600) may see a reduction of ~$5,520 before further indexation.
Indexation rate changes
From 1 June 2023, indexation is capped at the lower of CPI or WPI.
2023: 3.2% (after reform)
2024: 4.0%
2025: 3.2%
These lower rates slow debt growth compared to earlier years (e.g., 7.1% in 2023 before reform).
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How Indexation, Thresholds and Repayments Work Together
Example calculation
Imagine a graduate with a $30,000 HELP debt balance as at 1 June 2025.
First apply the 20 % reduction: $30,000 → $24,000 (assuming the legislation is enacted)
Apply indexation (3.2%): $24,000 × 1.032 = $24,768
Then when income tax is lodged, only the portion of income above $67,000 is used to calculate compulsory repayments for 2025‑26.
Why voluntary repayments matter
Since indexation is applied annually, making voluntary repayments before 1 June reduces the base amount on which indexation is calculated.
In essence: the earlier repayments are made, the lower the indexation growth and total repayment cost.
Repayment Tips for HELP Debtors in 2026
Tip 1: Monitor your repayment income
Repayment income is not just taxable income—it includes net investment losses, reportable fringe benefits, reportable super contributions and exempt foreign employment income.
If you expect your income to be near or above thresholds, plan ahead for withheld amounts from your employer via PAYG deductions or voluntary repayments.
Tip 2: Make voluntary repayments early
Even if compulsory repayments are nil (income below threshold), making voluntary payments reduces your loan balance, lowers future indexation charges and might save on total interest/indexation.
Tip: Use your myGov account to check your balance and make payments when convenient.
Tip 3: Keep updated on legislative changes
Because substantial reforms (threshold rises, 20 % reduction) are recent, stay aware of legislation timing and how it affects your debt. As noted by the ABC, the 20 % cut will be applied automatically, but the timing may vary across accounts.
Tip 4: Use repayment calculators
Online calculators provided by the Department of Education or ATO let you estimate how indexation, repayments and reductions apply to your debt.
Tip 5: Understand your filing and withholding obligations
If you have a HELP debt, you must inform your employer so that appropriate withholding occurs. After lodging your tax return, any excess withheld will be refunded if your compulsory repayment amount is lower than withheld amounts.
What Borrowers Should Watch Out For
Delaying repayments or ignoring balance: Over time, indexation adds up.
Misunderstanding repayment income: Forgetting to include all components can result in bigger compulsory repayments than expected.
Assuming threshold provisions will always stay: Parliamentary settings may change thresholds or rates in future budgets.
Counting on the 20 % reduction prematurely: Until legislation is fully enacted and processed by ATO systems, timing may vary.
Call to Action
If you hold a HELP loan, now’s the time to check your balance, update your employer if needed and make a plan for indexation and repayments. Share this article with fellow graduates or friends managing student debt, subscribe for alerts on student loan reforms, and comment below with your top question about HELP indexation or repayment thresholds. Being informed puts you in control of your student debt journey.
Conclusion
For many Australians, a HELP debt is more than just the cost of study—it’s a long‑term financial commitment shaped by indexation, repayment income thresholds and government policy. With the 2026 changes—lowered indexation rates, a higher threshold before repayment is required and the one‑off 20 % debt reduction—the system has shifted to become fairer and more manageable.
However, the key to staying ahead is preparation: understanding how indexation is applied, tracking your repayment income and considering voluntary repayments to minimize long‑term cost. With this guide’s breakdown and tips, borrowers can navigate the HELP landscape confidently and shape a smarter path to debt‑repayment success.
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