What is HECS-HELP?
HECS-HELP is the Australian government loan scheme that allows eligible students to defer their university tuition fees and repay them later through the tax system once they are earning above a certain income threshold. It is one of the most generous student loan systems in the world — there is no interest charged, though the debt is indexed annually to inflation (CPI).
How Repayment Works
Repayment is automatic through the tax system. Your employer withholds extra tax based on your income level, and the ATO applies it to your HECS debt. The compulsory repayment threshold for 2024-25 is $54,435. Below this income, you pay nothing. Above it, repayment rates start at 1% and increase with income up to 10% for incomes over $151,201. For example, someone earning $70,000 would repay approximately 2% of their income ($1,400/year) toward their HECS debt.
Indexation — The Hidden Cost
While HECS has no interest, it is indexed to CPI each year on 1 June. In 2023, indexation was 7.1% which caused significant public outcry and led to reforms capping future indexation at the lower of CPI or the Wage Price Index. This means a $30,000 debt could increase by $2,000 or more in a single year just from indexation. Making voluntary repayments before 1 June can reduce the amount that gets indexed.
Should You Pay It Off Early?
This is a common question. Since HECS has no real interest (only CPI indexation), many financial advisors suggest keeping the debt and investing your money elsewhere for potentially higher returns. However, if indexation is high and you have spare cash, voluntary repayments before June can save you money. There is no penalty for early repayment and no benefit to keeping the debt longer than necessary.
Impact on Migration
For international students who studied in Australia on FEE-HELP, be aware that the debt follows you even if you leave Australia. Since 2017, the ATO can collect HECS-HELP debts from Australians and former residents living overseas if their worldwide income exceeds the repayment threshold. If you become a permanent resident, your HECS debt continues as normal through the tax system.
Checking Your Balance
You can check your current HECS-HELP balance through your myGov account linked to the ATO. Log in, go to the ATO section, and look under Study and Training Loans. Your annual tax assessment will also show your current balance and any compulsory repayments made during the year.