Australia 2025 • HECS/HELP • indexation • repayment threshold • strategy
HECS/HELP Debt: Should You Pay It Down Early in 2025?
학자금 부채 조기상환 판단법 — 인덱세이션(indexation), 상환 임계치(repayment threshold), 전략(strategy)
TL;DR Summary (5 points)
- Indexation rule (from 2024): annual indexation uses the lower of CPI or WPI and is applied on 1 June each year.
- 2025–26 minimum repayment threshold: $67,000 RI with a new marginal scale; repayments only apply to income above the threshold.
- One-off relief in 2025: the Government applies a 20% reduction to student loan balances as at 1 June 2025 (before indexation).
- When early payment makes sense: high, secure cash savings earning less than your expected indexation; plans to move overseas; or mortgage leverage strategies exhausted.
- When to hold: cash earns higher interest than expected indexation, you’re below the new threshold, or you need liquidity for essentials.
Concept Overview — why this matters in Australia
- HELP is not interest-bearing but is indexed annually to preserve real value. Since 2024, indexation is capped at wage growth (lower of CPI/WPI).
- From 2025–26, the repayment threshold rises to $67,000 and a marginal system reduces the “cliff effect”, improving cash flow for many workers.
- In 2025, a 20% credit to outstanding balances (as at 1 June 2025) further reduces lifetime repayments for eligible borrowers.
- Decision-making is about opportunity cost: compare expected indexation vs returns on cash, mortgage rates, or other priorities.
Use the decision guide below to weigh early repayment against keeping cash or paying down higher-rate debts.
Comparison Table — Pay Early vs Let It Run
| Feature | Pay Down Early (2025) | Let It Run (Make Compulsory Repayments) |
|---|---|---|
| Cost driver | Reduce balance before next 1 June indexation | Balance indexed annually; repayments via tax when RI ≥ threshold |
| Cash flow impact | Immediate cash outlay; lower future repayments | No lump sum needed; higher future repayments if income rises |
| Return vs alternatives | Implicit “return” ≈ avoided indexation | Keep cash earning savings rate or used on higher-interest debts |
| Flexibility | Lower balance permanently; less liquidity | Maximum liquidity; can still make targeted voluntary payments |
| Best for | Surplus cash, low emergency needs, expect higher indexation | Tight budgets, below threshold, better returns elsewhere (e.g., mortgage) |
| Limitations | No tax deduction for voluntary payments | Balance can rise with indexation if repayments are small |
Who Each Option is Best For (decision criteria)
- Pay Early You expect indexation to exceed your after-tax savings/mortgage offset rate, have a full emergency fund (e.g., 3–6 months), and plan to work overseas (to avoid overseas repayment admin/penalties).
- Let It Run Your cash earns close to or above expected indexation, you’re below $67,000 RI in 2025–26, or you need liquidity for rent, childcare, moving costs, or paying down higher-rate debts.
- Targeted Lump Sum Make a voluntary payment in May (before 1 June indexation) if you’ve already funded other priorities.
Step-by-Step: How to Decide in 2025
- Confirm your balance & loan type: Check ATO online services (myGov) for current HELP balance and any indexation applied on 1 June 2025.
- Estimate 2026 indexation: Use the rule “lower of CPI or WPI” as guidance; watch ABS CPI/WPI updates during Q1/Q2 each year.
- Compare opportunity cost: Savings/offset rate (after tax) vs expected indexation. If offset at 5.8% after tax and indexation ~3–4%, keeping cash often wins.
- Check your income band: If your 2025–26 repayment income (RI) is under $67,000, compulsory repayments are nil.
- Prioritise high-interest debts: Pay credit cards/BNPL/personal loans first, then consider mortgage offset, then HELP.
- If paying early: Make the voluntary payment before 1 June through ATO payments (BPAY/debit). Keep the receipt.
- Reassess annually: Re-run the comparison each April/May with fresh CPI/WPI data and your updated cash rate/mortgage rates.
Costs, Thresholds & Tax — Australia 2025
- Indexation timing: Applied to HELP debts on 1 June each year. Since 2024, indexation uses the lower of CPI or WPI.
- 2025–26 threshold: Minimum compulsory repayment $67,000 RI, with a new marginal repayment system.
- One-off 2025 credit: 20% reduction to outstanding student loans as at 1 June 2025 (before indexation), for eligible borrowers.
- Tax: Voluntary HELP payments are not tax-deductible. Compulsory repayments are part of your tax assessment and reduce the loan balance.
- Overseas: Moving overseas? You must report worldwide income and may have a compulsory repayment based on your assessed income.
FAQ (people also ask)
What is HECS/HELP indexation in 2025?
Indexation is applied on 1 June and, from 2024 onward, is set to the lower of CPI or WPI. This caps growth when wages rise slower than prices.
What is the HELP repayment threshold for 2025–26 in Australia?
The minimum compulsory repayment threshold is $67,000 RI, with a marginal scale so repayments only apply to income above that level.
Did the government reduce HELP debts in 2025?
Yes. A 20% reduction applies to outstanding student loan balances as at 1 June 2025 (before indexation), subject to the program’s eligibility rules.
Should I make a voluntary payment before 1 June?
Consider it if your expected indexation exceeds your after-tax savings/offset return and you have a full emergency fund. Paying before 1 June reduces the balance exposed to indexation.
Is it better to pay my mortgage or HECS/HELP first?
Generally prioritise the higher effective rate. If your mortgage/credit card rate is above expected indexation, direct extra cash there first.
Do voluntary HECS/HELP payments give a tax deduction?
No. There’s no tax deduction for voluntary HELP repayments. They simply reduce your balance.
What happens if I move overseas with HECS/HELP?
You must lodge worldwide income and may need to make a repayment depending on your assessed income. Penalties can apply for not reporting.
How do I check my current HECS/HELP balance?
Log in to myGov → ATO to see your loan details, indexation applied, and make voluntary payments via the ATO.
Sources / Official References
- ATO — Study & Training Loans: Indexation (method & timing)
- Department of Education — HELP Indexation (lower of CPI/WPI) & 2023–24 adjustments
- Department of Education — FAQs: 20% reduction on balances as at 1 June 2025
- ATO — 2025–26 repayment thresholds & marginal system
- StudyAssist — Loan repayments (threshold, assessment)
- ATO — Overseas obligations for HELP debt
Disclaimer
This article is for general information only and is not financial advice. It does not consider your objectives, financial situation or needs. Check official government resources or a licensed financial adviser before making decisions.