Millions of Australians with HECS-HELP debt will see their student loans indexed again on 1 June 2026, with the official indexation rate confirmed at 2.8%.
While HECS debt does not charge traditional interest, indexation increases your balance each year to keep pace with inflation. Following the controversial 7.1% increase in 2023, the Government introduced reforms to reduce the impact of future indexation increases and make repayments fairer for graduates.
This guide explains:
- What HECS indexation is
- The official 2026 indexation rate
- 2026-27 repayment thresholds
- How the new repayment system works
- The 20% HELP debt reduction changes
- Whether voluntary repayments still make sense
What Is HECS Debt Indexation?
HECS-HELP debt is indexed each year on 1 June to maintain the real value of the loan against inflation.
Unlike a bank loan or credit card, HECS debt does not charge traditional interest. Instead, the balance increases annually based on inflation data.
HELP debt is only indexed if the debt has existed for at least 11 months.
2026 HECS Indexation Rate
The official HECS-HELP indexation rate for 2026 is:
2.8%
The new 2.8% rate is significantly lower than the record 7.1% indexation applied in 2023 and lower than the 4.7% rate seen in 2024.
Following reforms introduced by the Government, HELP debt indexation is now capped at the lower of:
- Consumer Price Index (CPI)
- Wage Price Index (WPI)
This change is designed to prevent large inflation spikes from dramatically increasing student debt balances in future years.
2026 Indexation Examples
- $20,000 HELP debt → approximately $560 added
- $40,000 HELP debt → approximately $1,120 added
- $70,000 HELP debt → approximately $1,960 added
2026-27 HELP Repayment Thresholds
The Australian Government has confirmed the new HELP repayment thresholds and repayment calculation method for the 2026–27 financial year.
A compulsory repayment must be made once your repayment income exceeds:
$69,528
This is an increase from the previous $67,000 minimum repayment threshold introduced under the new HELP repayment reforms.
How The 2026-27 Repayment System Works
Under the new marginal repayment model, compulsory repayments are calculated progressively rather than applying a flat percentage to your entire income.
In the 2026–27 income year, compulsory repayments are calculated by:
- Adding $0.15 for every dollar earned above $69,528
- Adding an additional $0.17 for every dollar earned above $129,717
- Or calculating 10% of your total repayment income - whichever amount is lower
2026–27 Repayment Examples
| Repayment Income | Estimated Compulsory Repayment |
|---|---|
| $70,000 | Approximately $71 |
| $80,000 | Approximately $1,571 |
| $100,000 | Approximately $4,571 |
| $130,000 | Approximately $9,071 before additional upper-tier calculations |
The updated system is designed to make HELP repayments fairer by ensuring graduates only repay more as their income increases.
20% HELP Debt Reduction
The Government also introduced a one-off 20% HELP debt reduction for eligible student loan balances.
The reduction applies to HELP debts that existed before indexation was applied on 1 June 2025.
Example
- $30,000 HELP debt → reduced by $6,000
- $50,000 HELP debt → reduced by $10,000
- $80,000 HELP debt → reduced by $16,000
The Australian Taxation Office applies the reduction automatically for eligible borrowers.
Historical HECS Indexation Rates
| Year | Indexation Rate |
|---|---|
| 2026 | 2.8% |
| 2025 | 3.2% |
| 2024 | 4% (previously 4.7%) |
| 2023 | 3.2% (previously 7.1%) |
| 2022 | 3.9% |
| 2021 | 0.6% |
| 2020 | 1.8% |
Should HECS Debt Indexation Be Abolished?
The sharp rise in HECS indexation during 2023 triggered widespread criticism from students and graduates across Australia.
Many argued that rapid debt increases unfairly penalised younger Australians already dealing with rising housing costs, inflation and wage pressure.
The Government responded by:
- Changing the indexation formula
- Introducing the 20% HELP debt reduction
- Increasing repayment thresholds
- Moving to a marginal repayment system
While indexation still applies, future increases are now expected to remain lower and more predictable.
Should You Make Voluntary HECS Repayments?
Whether voluntary repayments make sense depends on your financial situation and goals.
You may consider paying down HELP debt faster if:
- You expect future indexation increases
- You want to improve borrowing capacity for a mortgage
- You already have emergency savings available
- You have a large HELP balance
However, many Australians prioritise:
- Emergency savings
- Home deposits
- Superannuation contributions
- Higher-interest debts first
Because HELP debt generally remains one of the lowest-cost forms of debt in Australia.
Frequently Asked Questions
Does HECS debt charge interest?
No. HELP debt does not charge traditional interest, but indexation is applied annually based on inflation.
When is HECS debt indexed?
HELP debt is indexed on 1 June each year.
What is the HECS indexation rate for 2026?
The official 2026 HELP debt indexation rate is 2.8%.
What is the minimum repayment threshold for 2026–27?
The minimum compulsory repayment threshold is $69,528.
How does the new repayment system work?
The new system uses marginal repayment rates, meaning repayments only apply to income earned above each repayment threshold rather than your entire salary.
Can I make voluntary repayments?
Yes. Voluntary repayments can be made at any time and reduce the amount of indexation applied to your HELP debt.
Calculate Your HELP Debt repayments
To calculate your compulsory repayments under the new 2026-27 HELP repayment system, select "Includes HELP debt" on our tax calculator to estimate how much you may need to repay after the latest threshold and indexation changes.