When do HECS repayments start in 2025-26?

You start repaying once your income exceeds $67,000 in 2025-26. Below $67,000, you pay nothing. Under the new marginal system that started 1 July 2025, repayments are calculated only on the income above the threshold — not on your total income (which was the old system, replaced).

How are HECS repayments calculated under the new marginal system?

From 1 July 2025, HECS uses a 3-band marginal repayment system: nil on income up to $67,000; 15c per dollar above $67,000 up to $125,000 (maximum $8,700); $8,700 plus 17c per dollar above $125,000 up to $179,285 (maximum $17,928); and 10% of total income above $179,285. On $85,000 salary: $0 on the first $67,000, plus 15% × $18,000 = $2,700/year (about $104/fortnight).

How does HECS indexation work?

HECS doesn't charge interest but is indexed annually on 1 June. After the 7.1% indexation in 2023, the government capped indexation at the lower of CPI or Wage Price Index (WPI) from 1 June 2023 onwards. ATO sets the rate in late May. The 1 June 2026 indexation was confirmed by the ATO at 2.8% — the lowest since 2021.

Did the 2026-27 Federal Budget change HECS?

No further HECS changes were announced in the 12 May 2026 Budget. The new marginal system (effective 1 July 2025) continues unchanged. The 1 June 2026 indexation rate was confirmed by the ATO at 2.8%.

HECS/HELP Repayments: Everything You Need to Know

Q: What changed on 1 July 2025?

Two big changes. First, a one-off 20% cut to existing HECS-HELP balances. Second, a complete replacement of the old repayment system. The old 18-bracket rate-on-total-income system (with $54,435 threshold and rates from 1% to 10% of total income) was scrapped. The new marginal system has just 3 bands and only applies the rate to income above the threshold — a much fairer model.

Updated 13 May 2026 · FY 2025–26 rates (new marginal system from 1 July 2025) · 7 min read

JBy Jarrod, Editor · See editorial standards

HECS-HELP is one of the most generous student loan systems in the world — no interest, income-contingent repayments, and it dies with you. The system was overhauled on 1 July 2025: a one-off 20% balance cut for existing borrowers, plus a new marginal repayment model that replaces the old 18-bracket rate-on-total-income system. Here's the complete current guide.

What changed on 1 July 2025 The Government scrapped the old HECS repayment system entirely. The old rules (threshold $54,435, 18 brackets, rates 1%-10% applied to total income) are gone. The new system has just 3 marginal bands and applies the rate only to income above the threshold — a substantially fairer model. The Budget 2026-27 (12 May 2026) confirmed no further HECS changes; the new marginal system continues. Full Budget 2026-27 breakdown →

When do repayments start?

You start repaying once your income exceeds $67,000 for FY 2025-26 (and continuing through FY 2026-27 — ATO publishes the indexed threshold in late May 2026, but the structural rules are unchanged). Below $67,000 you pay nothing. From the first dollar above $67,000, the marginal system kicks in.

The 2025-26 marginal repayment system

Repayments are calculated as a marginal rate on income above the threshold — not the older "rate on total income" approach. Three bands:

Income	Repayment rule
$0 – $67,000	Nil
$67,001 – $125,000	15c per $1 above $67,000 (max $8,700)
$125,001 – $179,285	$8,700 + 17c per $1 above $125,000 (max $17,928)
$179,286 and over	10% of total repayment income

Worked example — $85,000 salary: Nil on the first $67,000, then 15c per dollar on $18,000 = $2,700/year (about $104/fortnight withheld through PAYG). Compare to the old system, where the same salary would have paid 4% of total income = $3,400/year. The new model is materially better for most earners between $67k and $125k.

Worked example — $140,000 salary: Nil on the first $67,000, plus the full $8,700 from the 15c band, plus 17c on $15,000 = $2,550. Total: $11,250/year (about $432/fortnight).

Indexation: the "interest" that isn't interest

HECS doesn't charge interest, but it is indexed annually on 1 June. After the 7.1% indexation shock in 2023, the government capped indexation at the lower of CPI or the Wage Price Index (WPI) from 1 June 2023 onwards. The ATO publishes the rate in late May each year. The 1 June 2026 indexation was confirmed by the ATO at 2.8% based on December 2025 quarter data.

Should you pay it off early?

Financially, usually no. Since HECS is indexed at roughly inflation (not a real interest rate), your money almost always works harder elsewhere — even in a high-interest savings account at 5%+. The exception is if you're about to buy a home and your HECS repayment is reducing your borrowing power — paying it down could free up $30,000–$50,000 in borrowing capacity.

The 10% voluntary repayment discount was abolished in 2017, so there's no bonus for paying early. And HECS debt is forgiven on death — it doesn't pass to your estate.

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