A HECS-HELP debt does not charge interest, but it does grow each year through indexation. That catches a lot of people out, especially in years when inflation is high. Here is how indexation works, what changed recently and how to keep it down.
What indexation is
Your study loan is indexed on 1 June each year to keep its real value steady as prices rise. It is not interest — it is an inflation adjustment applied to the balance you still owe.
Because it lands on 1 June, the timing of your payments matters. Indexation applies to whatever balance is left after any voluntary payments that have cleared before 1 June.
How the rate is worked out
Indexation used to be tied only to the Consumer Price Index (CPI). After a 2024 change, the rate is now the lower of CPI or the Wage Price Index (WPI). That change was backdated, which reduced some recent years' indexation.
The practical effect: in years where wages grow slower than prices, your loan is indexed by the smaller figure. You can see your projected balance and repayments with the HELP/HECS Calculator.
A worked example
Say you owe $30,000 on 1 June and indexation that year is 3.5%:
- Indexation added: 3.5% × $30,000 = $1,050.
- New balance: $31,050, before any compulsory repayment from your return is applied.
If you had made a $5,000 voluntary payment that cleared before 1 June, indexation would apply to $25,000 instead, adding $875 — a $175 saving in that year alone.
How repayments work
Indexation is separate from your compulsory repayments. Once your income passes the threshold (around $67,000 for 2025-26), your employer withholds extra and it is paid off your loan when you lodge. The HELP Repayment Threshold page shows the current bands, and the Salary Tax Calculator shows the effect on your take-home pay.
How to reduce what indexation costs you
- Make voluntary payments before 1 June, not after — only the balance on indexation day is indexed.
- Weigh it against other goals. With no real interest beyond inflation, paying a HECS debt down early is rarely the highest-return use of spare cash compared with, say, an offset account or super. Run the numbers before tipping in a lump sum.
- Keep your details current so compulsory repayments are withheld correctly and you are not left with a bill.