What Is Indexation on HECS? 2026 Guide

What is indexation on HECS? It is a once-a-year adjustment, applied by the Australian Taxation Office (ATO) on 1 June, that raises your HELP debt in line with inflation. It is not interest. Since the 2023 changes it uses the lower of CPI or the Wage Price Index, and the rate applied on 1 June 2026 was 2.8%.

Updated October 2026: this guide uses the confirmed 2026 rate instead of a projection, shows exactly which part of your balance gets indexed (the 11-month rule most explainers skip), walks through the 20% debt cut and the 2023-24 recalculation, and adds worked examples you can check against your own myGov balance. Want your own figure? Use the indexation calculator with your balance from myGov.

What is indexation on HECS, in plain terms

HELP loans (HECS-HELP, FEE-HELP, VET Student Loans and the other study and training loans) don't charge an interest rate the way a bank loan does. Instead, the outstanding balance is adjusted once a year so that its real value keeps pace with prices or wages. If your debt is A$40,000 and the indexation rate is 2.8%, your balance rises by A$1,120 on 1 June, assuming all of it is old enough to be indexed.

Three practical consequences follow. First, indexation doesn't change how much you must repay in a given year; compulsory repayments depend on your income, not your balance. Second, it does change how long you will be repaying, because the balance grows. Third, because it is linked to inflation rather than a lender's margin, it is usually far cheaper than commercial credit, which is why many people choose not to rush voluntary repayments.

How the HECS indexation rate is calculated

The rate is calculated from Australian Bureau of Statistics data. Since legislation passed in late 2024, and backdated to 1 June 2023, the indexation factor is the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI) measure for the relevant period. The intent, in the government's words reported by the Department of Education, is that HELP debts should not grow faster than wages.

The ATO publishes the new rate before 1 June each year on its study and training loan indexation rates page, and StudyAssist announces it in its news. For 2026, StudyAssist confirmed a rate of 2.8%, described as the lowest since 2021.

HECS indexation rates by year

The table shows the rate applied on 1 June in recent years, as listed by the ATO. The 2023 and 2024 rates were later cut retrospectively when the lower-of-CPI-or-WPI rule was backdated.

For older years and a longer chart, see our HECS indexation rate history.

Which part of your debt is indexed: the 11-month rule

Not every dollar of your debt is indexed on 1 June. The ATO applies indexation to the part of your accumulated debt that has remained unpaid for more than 11 months. New debt from a recent census date is left alone until the following year.

The last row trips up a lot of people. The HECS amount withheld from each pay is a prepayment of tax, not a payment off your loan. It reaches your HELP account when the ATO assesses your tax return, which for most people happens after 1 June. Only a voluntary payment made directly to the ATO, and processed in time, reduces the balance that gets indexed. For 2026 StudyAssist advised making voluntary payments by 26 May to allow processing.

How the 20% HELP cut interacts with indexation

The Universities Accord (Cutting Student Debt by 20 per cent) Bill 2025 passed Parliament on 31 July 2025 and received Royal Assent on 2 August 2025. The reduction was calculated on balances as at 1 June 2025, before that year's indexation, and the 2025 indexation was then recalculated on the reduced amount. If you paid your debt off completely before 1 June 2025, you didn't get the reduction.

Worked example: a A$50,000 balance on 1 June 2025 fell to A$40,000 after the 20% cut, then 3.2% indexation took it to A$41,280. Without the cut, the same 3.2% would have produced A$51,600. Our guide to the 20% HECS debt reduction covers edge cases such as debts repaid after 1 June 2025.

Should you pay before indexation? Worked numbers

A voluntary payment before 1 June saves you the indexation on that amount, and nothing more. At the 2026 rate the saving is modest.

So A$5,000 paid early "earns" a 2.8% return, tax-free, in the form of indexation avoided. Whether that beats your alternatives depends on your offset account or savings rate after tax, whether you'll need the money soon, and whether you're about to apply for a home loan (a smaller HELP balance doesn't always change how a lender assesses you; the repayment obligation is income-based). Our voluntary repayment calculator runs the comparison.

Indexation vs your compulsory repayment

Indexation and repayment are separate dials. Indexation grows the balance once a year; compulsory repayments come out through the tax system when your repayment income passes the threshold. For 2025-26 the marginal system started at A$67,000, with 15 cents per dollar above that up to A$125,000. For 2026-27 the threshold is reported at A$69,528. If your repayments are smaller than the indexation added each year, your balance can rise even while you are repaying, which is common for people just over the threshold with large balances.

When indexation outpaces your repayments

Here is the situation the threshold creates for people on modest incomes. Take a A$30,000 balance and a repayment income of A$75,000 in 2026-27. Under the marginal system the compulsory repayment is 15% of the income above A$69,528, which is about A$821 for the year. Indexation at 2.8% on A$30,000 adds A$840. The balance barely moves: in a simplified model that holds the rate at 2.8% and income flat, it sits around A$30,000-A$30,060 for three years.

This is an illustration, not a forecast: future indexation rates and thresholds will change, and a pay rise lifts the repayment quickly because every extra dollar above the threshold attracts 15 cents. The lesson is that for balances in this range and incomes just over the threshold, indexation, not the repayment rate, decides how long the debt lasts. That is exactly the case where a voluntary payment before 1 June, or a planned salary step-up, makes a visible difference. Moving overseas doesn't switch indexation off either; it keeps applying each 1 June, and overseas debtors have their own reporting obligations, covered in our guide to HECS debt when you move overseas.

How to see indexation on your own account

You can check what was added on 1 June through myGov. Once your myGov account is linked to the ATO, the study and training loan section shows your balance and the transactions on it, including the indexation amount, compulsory repayments credited after your tax return is assessed, voluntary payments, and any 20% reduction or indexation credit. If you have recent debt that hasn't reached the ATO yet (for example, units from this year's census dates), the Department of Education's myHELPbalance service, accessed through myGov, shows it before it transfers. Compare the two around June and July and you can see exactly which part of your debt was old enough to be indexed.

Common misconceptions about HECS indexation

• "Indexation is interest." It isn't charged as an interest rate, and it is applied only once a year.
• "My pay deductions stop indexation." They don't until your tax return is assessed.
• "The rate is always CPI." Since 1 June 2023 it is the lower of CPI or WPI.
• "I must apply for the 2023-24 credit." The ATO recalculated affected accounts and applied indexation credits automatically.
• "Indexation can be avoided by deferring." Indexation applies regardless of whether you are earning above the threshold.

For the official wording, see the ATO's indexation rates page and the Department of Education's HELP indexation credit FAQs. This page is general information, not personal financial advice; check your own balance in myGov.

This article is general information, not financial, tax or legal advice. Figures are approximate and change over time — always verify with a qualified professional or the official source before making a decision.

Written and reviewed by the HECS Debt Calculator editorial team. Facts checked against primary sources; see the reference above.

← All articles