On 1 June 2026 the Australian Taxation Office applied indexation of 2.8 per cent to study and training support loan balances. On a $30,000 debt that is $840 added in a single day.
Three years earlier the figure was 7.1 per cent, which on the same balance would have been $2,130. That number caused enough political noise that the formula was changed and the 2023 rate was retrospectively recalculated down to 3.2 per cent.
A HECS loan charges no interest. It still grows. Both statements are true, and most explanations get one of them wrong.
One thing to settle first: HECS-HELP is for Commonwealth supported domestic students, generally Australian citizens and eligible permanent humanitarian visa holders. On a student visa you pay tuition upfront and none of this applies, though the cost of living comparison across the UK, Germany and Australia will.
Quick facts
All figures ATO, checked September 2026.
| Item | Detail |
| Interest charged | Nil |
| Indexation date | 1 June each year |
| What gets indexed | Only the portion unpaid more than 11 months |
| Formula | Lower of CPI and WPI |
| Rate applied 1 June 2026 | 2.8% |
| Rate applied 1 June 2025 | 3.2% |
| 2025-26 repayment threshold | $67,000 |
| 2026-27 repayment threshold | $69,528 |
| Repayment method from 1 July 2025 | Marginal, on income above the threshold |
| Overseas reporting trigger | 183 days or more in any 12 months |
Indexation is not interest, and the difference is real
Interest is a charge for the use of money. It accrues over time, usually daily or monthly, and on most consumer debt it compounds, meaning last month's interest earns interest this month. A credit card works this way. So does a car loan.
A HELP debt does none of that. Once a year the balance is restated so that it represents the same purchasing power it did twelve months earlier. If prices rose 2.8 per cent, the number on your account rises 2.8 per cent. In real terms you owe exactly what you owed.
Two things follow. There is no compounding within the year: money paid off in October is not sitting there on 1 June, and no accrual clock ticks in between. And the rate is not set by a lender's margin or your credit risk, but from Australian Bureau of Statistics data.
Here is the part people skate over. Your balance still gets bigger. If you are paying nothing, or paying less than the indexation amount, the number goes up every June. It is not interest, but it is not free either. A debt that stays flat in real terms for fifteen years is still a debt for fifteen years.
The 11 month rule and what it means if you enrolled mid year
Indexation on 1 June applies only to the part of your accumulated loan that has been outstanding for more than 11 months. Anything newer is skipped that year.
Work backwards from 1 June and the cutoff is roughly 1 July of the previous year. A HECS amount incurred at the semester 1 census date in March 2025 had been sitting there about fifteen months on 1 June 2026, so it was indexed. An amount incurred at the August 2025 census date had been outstanding about ten months, so it was skipped and gets its first indexation on 1 June 2027.
Semester 2 enrolments get an extra year of grace on that tranche. Semester 1 enrolments do not.
There is a less pleasant quirk on the other side. The compulsory repayment withheld from your pay is held by the ATO as a tax credit, not applied to your loan account, until your return is assessed. Returns lodged from July are assessed after 1 June, so a year of withholding sits on the sidelines while indexation is calculated on the higher balance. This is the most common source of the complaint that people are paying and the debt is not moving.
The formula changed, and two past years were recalculated
Until 2023, indexation was based on the Consumer Price Index alone. In the high inflation year of 2023 that produced 7.1 per cent, the highest in decades, on every eligible balance in the country.
The government then legislated a cap: indexation is now the lower of the Consumer Price Index and the Wage Price Index. The ATO's guidance on the measure states it applies to loan accounts that existed on 1 June 2023, so it was backdated rather than applied only going forward.
The effect on the two affected years, per the ATO's published rates table:
- 2023: originally 7.1 per cent, recalculated to 3.2 per cent
- 2024: originally 4.7 per cent, recalculated to 4.0 per cent
Indexation credits were applied to accounts to reflect the difference. Separately, and this is the measure people most often confuse with the indexation change, a 20 per cent reduction was applied to all study and training support debts existing on 1 June 2025. The ATO has confirmed that processing is complete, and that where an account went into credit a refund was issued provided no other tax or Commonwealth debts were outstanding.
If you have not looked at your loan account since 2024, the balance you remember is almost certainly not the balance you have.
Verified indexation rates
From the ATO's indexation rates page, checked September 2026. The 2023 and 2024 entries show the recalculated rates that now apply, with the originals in brackets.
| Indexation applied on 1 June | Rate |
| 2026 | 2.8% |
| 2025 | 3.2% |
| 2024 | 4.0% (originally 4.7%) |
| 2023 | 2023 |
| 2022 | 3.9% |
| 2021 | 0.6% |
| 2020 | 1.8% |
| 2019 | 1.8% |
Look at 2021: six tenths of one per cent, or $180 on a $30,000 debt. Then look at the original 2023 figure. The variability is the point. This is not a fixed cost you can plan around.
A worked example on $30,000
Take a graduate with a $30,000 balance, all of it more than 11 months old, in 2025-26. Indexation on 1 June 2026 was 2.8 per cent, so $840 is added.
From 1 July 2025 compulsory repayments are calculated marginally, only on income above the threshold. For 2025-26 the threshold is $67,000, with income between $67,001 and $125,000 charged at 15 cents in the dollar over $67,000.
| Repayment income | Compulsory repayment | Indexation at 2.8% on $30,000 | Net movement in the balance |
| $66,000 | $0 | $840 | Up $840 |
| $69,000 | $300 | $840 | Up $540 |
| $75,000 | $1,200 | $840 | Down $360 |
| $85,000 | $2,700 | $840 | Down $1,860 |
| $110,000 | $6,450 | $840 | Down $5,610 |
The honest reading is the row most articles leave out. A graduate on $69,000, an ordinary early career salary, repays $300 and is indexed $840, so the balance is larger at the end of the year than at the start despite having paid. On $75,000 they are ahead by $360, and at that pace a $30,000 debt is a very long project. The crossover here is about $72,600 of repayment income, where the marginal repayment first exceeds $840.
This is arithmetic, not a scandal. Indexation holds the debt constant in real terms, and someone repaying $300 has repaid $300 of real value. But if you were told a HECS loan quietly shrinks while you get on with your life, the table is the correction. The 2026-27 threshold has since risen to $69,528, with the same 15 cent rate to $129,717.
Is a voluntary repayment before 1 June worth it
Mechanically, yes. Indexation is calculated on the balance as it stands on 1 June, so a dollar paid off before that date is a dollar that is not indexed. At 2.8 per cent, paying $5,000 in May rather than July avoids $140.
Timing is the operational risk. The ATO advises allowing enough time for the payment to be received and processed before 1 June, and states that electronic payments and Australia Post transfers can take up to four business days. Paying on 30 May is not paying before 1 June. A voluntary repayment also does not reduce or replace your compulsory repayment, which you still owe at assessment if your income is above the threshold.
Now the caveat. The saving is 2.8 cents on the dollar per year, and that is the entire benefit. Money sent to the ATO in May is money you do not have in June for a bond, four weeks of rent in advance, or the buffer that stops you signing a bad lease because you cannot afford to wait. Bond and advance rent alone can run well past $2,000 before any furniture, the kind of upfront cost we break down in the Brisbane cost of living guide and the Sydney and Melbourne cost comparison.
A HELP debt is almost certainly the cheapest money you will ever be lent. No interest, repayment tied to income, nothing owed below the threshold, no collection action if you lose your job. Carrying it while you build an emergency fund is defensible, and so is clearing it. We are not telling you which to pick.
What happens if you move overseas
Indexation does not stop at the border.
The ATO is explicit that a study or training loan continues to be indexed each year until it is paid, and that a balance may grow over time if no repayments are made. Leaving Australia does not pause the 1 June event.
There are also active obligations. If you intend to reside overseas for 183 days or more in any 12 month period, you must update your contact details and submit an overseas travel notification within seven days of leaving Australia, then report worldwide income each year. Non-residents with worldwide income at or below $16,750, which is 25 per cent of the 2025-26 threshold, lodge a non-lodgment advice instead.
The failure mode is boring and common: someone moves abroad after graduating, reports nothing for six years, and returns to a balance indexed six times with nothing paid against it. Voluntary repayments can be made from overseas at any time.
Frequently asked questions
Does HECS debt have interest?
No. A HELP debt does not attract interest at any rate. It attracts annual indexation on 1 June, which restates the balance in line with the lower of the Consumer Price Index and the Wage Price Index. There is no compounding accrual between indexation dates, so a repayment made in October reduces what is indexed the following June.
What is the HECS indexation rate for 2026?
The ATO applied 2.8 per cent on 1 June 2026, and 3.2 per cent on 1 June 2025. Rates are published on the ATO's indexation rates page after the relevant Australian Bureau of Statistics figures are released, and they change every year.
Why did my HECS debt go up even though I made repayments?
Two likely reasons. Either your compulsory repayment was smaller than the indexation amount, which happens routinely on incomes near the threshold, or the repayment had not yet been credited to the loan account on 1 June. Amounts withheld from your pay are held as a tax credit until your return is assessed, and returns lodged from July are assessed after that year's indexation.
What is the 11 month rule for HECS indexation?
Indexation applies only to the portion of your loan unpaid for more than 11 months. A debt incurred at an August census date has been outstanding about ten months by the following 1 June, so it is skipped that year and indexed for the first time the year after. A debt from a March census date is indexed at the next 1 June.
Was the 7.1 per cent indexation reversed?
Yes, in effect. The formula was changed to the lower of CPI and WPI, applied to loan accounts existing on 1 June 2023. The 2023 rate was recalculated from 7.1 per cent to 3.2 per cent and the 2024 rate from 4.7 per cent to 4.0 per cent, with credits applied. A separate measure cut all debts existing on 1 June 2025 by 20 per cent.
Should I pay off my HECS before 1 June?
Paying before 1 June avoids indexation on the amount paid, which at 2.8 per cent is $28 per $1,000 per year. Allow at least four business days for processing. Whether it is the best use of the money is a separate question: a HELP debt carries no interest, requires nothing below the income threshold, and is not chased if your income falls, which makes it cheaper than almost any alternative use of a cash buffer.
Does HECS indexation still apply if I live overseas?
Yes. Indexation continues each year until the loan is paid, wherever you live. If you reside overseas for 183 days or more in any 12 month period you must lodge an overseas travel notification within seven days of leaving and report worldwide income annually, with a non-lodgment advice available if that income is $16,750 or less.
Bottom line
Indexation is not a charge for borrowing, so the outrage about "interest on education" is technically misplaced. But the balance still climbs every June, and for a graduate on a modest income the climb can outrun the repayment. Both halves are true and you need both to decide sensibly.
If your repayment income is comfortably above the threshold, the compulsory repayment is doing real work and the debt shrinks without you touching it. If you are near or below the threshold, expect the balance to grow, decide whether that bothers you, and price the alternative honestly. A depleted bank account when a bond, four weeks of rent in advance and moving costs land in the same fortnight costs more than $140 of avoided indexation, sometimes in the form of a lease you would not otherwise have signed. Knowing your rights as a tenant and what a guarantor requirement involves is worth more to most students in a year than that.
Every figure in this post changes. Thresholds move annually with average weekly earnings, indexation is recalculated each year from ABS data, and policy in this area has changed twice since 2024. Check your own balance and the current rate on the ATO site before acting on anything here.
