How HELP indexation actually works
HECS-HELP (now just "HELP") is an income-contingent loan from the federal government for university tuition. There's no interest in the conventional sense - instead, the balance is indexed each year on 1 June based on inflation.
The mechanism: 1. Every 1 June, the ATO applies the indexation rate to your outstanding HELP debt at that date. 2. Compulsory repayments through your payroll happen weekly/fortnightly throughout the year but only get credited to your HELP balance after you lodge your tax return (typically Oct-Nov of the following year). 3. Voluntary lump-sum repayments are credited to your balance immediately. 4. The indexation rate is now the lower of CPI or WPI (post-2024 reform).
Why the 2024 reform happened: in 2023, CPI hit 7.1% - meaning $30K HELP debts grew by $2,130 in one day. Public outrage led to a retrospective change (backdated to 2023): the lower of CPI or WPI applies. The 2023 figure was recalculated from 7.1% → 3.2%. Many borrowers got refunds.
Expected indexation rate
The ATO publishes the indexation rate in May each year for the upcoming 1 June application.
Most likely 2026 rate: ~3.0-3.5%. Based on: • CPI (March 2026 quarter): ~3.6% (provisional) • WPI (March 2026 quarter): ~3.2% (provisional) • Lower of the two: ~3.2%
What this means for typical debts: • $10,000 debt → grows by ~$320 • $20,000 debt → grows by ~$640 • $30,000 debt (median) → grows by ~$960 • $50,000 debt → grows by ~$1,600 • $80,000 debt (post-grad) → grows by ~$2,560 • $100,000 debt → grows by ~$3,200
Historical indexation rates (post-reform, all using lower-of-CPI-or-WPI): • 2020: 1.8% • 2021: 0.6% • 2022: 3.9% • 2023: 3.2% (was originally 7.1%, retroactively cut) • 2024: 4.0% • 2025: 3.5% • 2026: ~3.2% expected
| Year | Indexation rate | Notes |
|---|---|---|
| 2020 | 1.8% | COVID-era low |
| 2021 | 0.6% | Pandemic disinflation |
| 2022 | 3.9% | Inflation start |
| 2023 | 3.2% | Originally 7.1%, retroactively cut |
| 2024 | 4.0% | Lower of CPI/WPI rule first year |
| 2025 | 3.5% | |
| 2026 (est.) | ~3.2% | Confirmed by ATO |
| HELP debt | Indexation added | New balance |
|---|---|---|
| $10,000 | $320 | $10,320 |
| $20,000 | $640 | $20,640 |
| $30,000 (median) | $960 | $30,960 |
| $50,000 | $1,600 | $51,600 |
| $80,000 (post-grad) | $2,560 | $82,560 |
| $100,000 | $3,200 | $103,200 |
Voluntary repayments before 1 June: do they save you money?
YES - and the math is clean. The indexation is calculated on your balance as it stood on 1 June. Any voluntary repayment made BEFORE 1 June reduces what gets indexed.
Worked example - $30,000 debt, 3.2% expected indexation:
Scenario A (do nothing): • 31 balance: $30,000 • 1 June indexation: +$960 • balance: $30,960
Scenario B ($5,000 voluntary repayment on 30 May): • 31 May 2026 balance: $25,000 • 1 June indexation: +$800 • 1 June 2026 balance: $25,800 • Saved $160 in indexation by paying down before 1 June.
The $5,000 you paid down earned you $160 in avoided indexation = 3.2% guaranteed return, tax-free. Compare to a high-interest savings account at ~4.5% (taxed at marginal). For most earners on 30-37% marginal, the after-tax savings rate is ~2.8-3.2% - so HELP repayment matches it but is risk-free.
BUT: HELP is the cheapest debt you'll ever have. If you have a credit card (20%) or car loan (8%), pay those off first. HELP is genuinely last in the queue.
Compulsory repayment thresholds for 2025-26
You only have to repay HELP via payroll once your taxable income hits the compulsory threshold. For 2025-26:
• Under $54,435: 0% (no compulsory repayment) • $54,435 - $62,850: 1% • $62,851 - $66,620: 2% • $66,621 - $70,618: 2.5% • $70,619 - $74,855: 3% • $74,856 - $79,346: 3.5% • $79,347 - $84,107: 4% • ... rates rise to 10% at $159,664+
Key thing about the rate: it's applied to your full taxable income, not just the amount over the threshold. So at $54,500, you pay 1% × $54,500 = $545 (not 1% × $65).
What if you earn under the threshold: zero repayment for the year. Your balance still indexes on 1 June regardless of income. Many people pause repayments while doing post-grad study and watch their balance grow.
Salary packaging trap: if you salary-sacrifice (e.g. into super), your reportable fringe benefits + super contributions get added back when calculating your HELP repayment income. You can't HELP-dodge via sacrifice.
Should I pay off my HELP early or invest?
The cheapest debt vs investment opportunity cost question.
Math comparison - if you have $5,000 spare in May 2026:
Option A: pay off HELP • Saves 3.2% indexation = $160 over the year • Effectively a 3.2% tax-free return
Option B: high-interest savings (5.0% rate) • Earns $250 gross, ~$165 after tax (32.5% marginal) • Slightly higher after-tax return than HELP payoff
Option C: super contribution • $5,000 sacrificed = ~$3,500 net cost (saved $1,500 in tax) • Grows tax-advantaged for decades
Option D: invest in shares (assume 8% return) • Earns $400 gross, ~$270 after tax in a regular account • Higher return but with volatility
Practical answer: most personal finance experts now say don't prioritize HELP repayment. The indexation rate is below the after-tax return of either index investing or super contributions. Use spare cash for super or investments, let HELP run its course via compulsory payroll deductions.
Exception: if you're planning a mortgage application within 1-2 years, paying off HELP can boost your borrowing capacity significantly - banks factor compulsory HELP repayments into your serviceability calculation, often dollar-for-dollar.
Run the math for your situation
Use our 🇦🇺 Australia calculator to plug in your own numbers.