HECS-HELP Debt Indexation: Why Your Student Debt Keeps Growing

On 1 June 2023, the balances of every Australian with a HECS-HELP debt increased by 7.1% overnight — the highest indexation rate in over three decades. A $30,000 debt became $32,130 in a single day. The government later cut that year's rate to 3.2% and backdated the change, and indexation is now capped at the lower of CPI and wage growth — 2.8% on 1 June 2026 (ATO).

How did this happen, and what can you do about it? This guide explains everything.

How HECS-HELP indexation works

HECS-HELP debt is not charged interest in the traditional sense, but it is indexed once a year on 1 June, at the lower of the change in the Consumer Price Index (CPI) and the Wage Price Index (WPI). Since 2025 the rate is set after the December CPI and WPI figures are released.

In formula terms: new balance = old balance × (1 + indexation rate / 100)

In a normal year with 2–3% inflation, this is a modest adjustment. But in 2022–2023, Australia experienced the highest inflation in decades — driven by global supply chain disruptions and energy price shocks — and HECS debts grew accordingly.

Historical indexation rates

For context on how unusual recent years have been:

Rates for 2023 and 2024 are shown after the government's retrospective cuts (source: ATO indexation rates). Even after the cuts, someone with a $30,000 debt at the start of 2022 who made no repayments would have seen it grow by about $3,450 through indexation over 2022–2024.

Why can repayments fail to reduce the debt?

Since 2025–26, compulsory repayments are marginal: you repay 15c for each dollar of repayment income above the threshold ($69,528 in 2026–27), not a percentage of your whole income. That lowered repayments for most people — which also means repayments near the threshold can be smaller than indexation on a large debt.

Example: at $75,000 income in 2026–27, the compulsory repayment is ($75,000 − $69,528) × 15% = $821. On a $45,000 debt, 2.8% indexation adds $1,260 — so the debt still grows by about $439 a year despite the repayments.

Use our HECS/HELP Repayment Calculator to model your own situation. You can adjust the indexation rate to see how different scenarios affect your payoff timeline.

Government response: 2024 indexation cap

In response to widespread public concern, the Albanese government legislated a change in 2024 that limited HECS indexation to whichever is lower — the wage price index or CPI. Wages grew at a slower pace than prices, so the rule cut the 2023 rate from 7.1% to 3.2% and the 2024 rate from 4.7% to 4.0%, applied retrospectively to balances that had already been indexed.

While not eliminating indexation, this change significantly reduces the worst-case scenario in future high-inflation years.

Strategies to manage your HECS-HELP debt

1. Make voluntary repayments before 1 June

Any voluntary repayment you make before 1 June reduces the balance that indexation is applied to. If you have $5,000 in savings you could use, making a voluntary repayment on 31 May saves you the indexation on that $5,000 — $140 at 2026's 2.8% rate — effectively a guaranteed return equal to the indexation rate.

2. Compare to your other debts

With HECS indexation now capped at the lower of CPI and wage growth (2.8% in 2026), and credit card rates at 20%+ and personal loans at 8–15%, HECS debt is almost certainly your cheapest debt. Prioritise paying off higher-rate debts first.

3. Consider the home loan impact

Your HECS repayment is treated as a reduction in net income by mortgage lenders. If you are planning to apply for a home loan, reducing or eliminating your HECS balance beforehand can increase your borrowing capacity by $50,000–$100,000 depending on income. This may justify accelerating repayments even if the indexation rate is low.

4. Know your repayment threshold

For 2026–27, no compulsory repayment is due if your repayment income is $69,528 or less (it was $67,000 in 2025–26). Above that, you repay 15c per dollar over the threshold, rising to 17c above $129,717 (ATO). If you are studying, taking a career break, or earning below this threshold, you are not legally required to make compulsory repayments — though voluntary ones can still be made.

Calculate your exact repayment using our HECS/HELP Calculator.

Frequently asked questions

Indexation rates and thresholds referenced in this article are based on ATO and ABS published data. The 2025 indexation rate is an estimate based on CPI data available at time of writing. This article is for general information only and does not constitute financial or tax advice.