It has no interest rate and nobody chasing it. So it sits unexamined for years.
General education only. Not financial advice.
A study or training loan works differently from every other debt you carry. It charges no interest. No lender can call it in. You repay nothing at all until your repayment income passes a threshold, which for the 2026-27 income year is $69,528, and above that you repay only on the part of your income over that line, until the top band at $186,051, where it becomes 10 per cent of the whole. Once a year, on 1 June, the balance is resized to keep pace with prices or wages, whichever moved less. That resizing is called indexation, and it is the part that most often goes unexplained.
Here is how it works, in the order it happens to you.
It is not a loan in the way the word usually means
Four things are true of a study loan that are not true of a credit card, a car loan or a mortgage.
There is no interest. Not a low rate. None. What happens instead is indexation, and the difference matters, because the two behave differently and are set by different things.
Nobody is chasing it in the way a lender would. There is no lender, no collections process and no monthly bill. Compulsory repayment goes through the tax system and is calculated on your tax return.
Repayment is not a choice you make each month. If your repayment income is above the threshold, the ATO works the amount out for you and it comes out through your tax. If it is below, you repay nothing, for as long as that stays true.
And the balance can go down as well as up. This is the part that surprises people, because the story usually told about study debt is that it only grows. In the last two years it has moved the other way, for two separate reasons, both of which are below.
What you repay in 2026-27, and on what
Compulsory repayment is worked out on a marginal scale. You repay on the income above each boundary, not on your whole income.
| Repayment income | What you repay |
|---|---|
| $0 to $69,528 | Nil |
| $69,529 to $129,717 | 15c for every $1 over $69,528 |
| $129,718 to $186,050 | $9,028 plus 17c for every $1 over $129,717 |
| $186,051 and over | 10% of total repayment income |
Read the top row again, because it is the one that gets misread. Passing the threshold does not mean you suddenly repay on everything you earn. Below $69,528 you repay nothing. At $70,000 you repay 15 cents on $472, which is about $71 for the year. The scale only turns into a flat percentage of the whole amount in the top band.
"Repayment income" is not your salary
This is the definitional trap in the system, and it catches people who have done everything else carefully.
Repayment income is the ATO's own term for a figure that is neither your salary nor your taxable income. It means taxable income plus net investment losses, reportable fringe benefits, reportable superannuation contributions and exempt foreign employment income.
Which means salary sacrificing into super does not lower it, because reportable super contributions are added back in. A negatively geared property does not lower it, because net investment losses are added back in. A packaged car through work may not lower it either, because any reportable fringe benefit is added back in.
That list is not a menu and none of it is an argument for or against any of those arrangements. It is only that if you were told your study loan repayment tracks your take-home pay, you were told something that is not how it is calculated, and the gap shows up at tax time rather than as anything visible in a fortnightly pay.
What indexation is, and what it is not
On 1 June each year the ATO indexes the part of the loan that has been unpaid for more than eleven months.
Interest and indexation do different jobs. Interest is a price charged for the use of someone else's money, and it makes a debt bigger in what it can buy. Indexation resizes the balance so that the debt keeps the same purchasing power it had a year ago.
A jar of coffee. If it cost $10 last year and $10.28 now, a $10 debt indexed at 2.8 per cent still buys exactly one jar of coffee. The number on the statement moved so that the debt would stay the same size.
That is the mechanism. Whether a debt that keeps its real size is a fair way to fund an education is a separate argument, and a live one, but it is a policy question rather than a maths one.
Who decided, and when it was decided differently
The rate is set by a rule, not by anyone's judgement each year, and the rule was rewritten recently.
Since the Universities Accord (Student Support and Other Measures) Act 2024, passed in November 2024, indexation is the lower of the Consumer Price Index or the Wage Price Index, both measured to the March quarter. Before that it was CPI alone. And the change was backdated to 1 June 2023, which is why two of the numbers on your account are not the numbers you were originally charged.
| 1 June | The rate that now stands | What was applied at the time |
|---|---|---|
| 2023 | 3.2% | 7.1% |
| 2024 | 4.0% | 4.7% |
| 2025 | 3.2% | 3.2% |
| 2026 | 2.8% | 2.8% |
If you remember 7.1 per cent and a headline about it, your memory is correct. That was applied, and then reduced retrospectively, and the ATO applied the difference back to accounts as an indexation credit automatically.
Then there is the second change, which is larger. A one-off 20 per cent reduction was applied to every outstanding student loan balance as it stood at 1 June 2025, before that year's indexation, with the indexation then recalculated on the reduced balance. More than $16 billion was removed across more than 3 million people. The legislation passed Parliament on 31 July 2025.
So the balance you last looked at, if you last looked in 2023, may not be the balance you have. Which of these applied to you depends on when your loan was incurred and what was outstanding on the day each change took effect.
The number moving on 1 June is not a penalty, and it is not evidence of a decision you got wrong. It is a rule someone wrote, and it has been rewritten twice in two years. Rules that can be rewritten are worth understanding, because understanding them is what lets you follow the argument the next time one is proposed.
- Study loans charge no interest. They are indexed once a year, on 1 June.
- Repayment is marginal. Below the threshold you repay nothing, and above it you repay only on the part over the line, until the top band, which is 10 per cent of the whole.
- Repayment income is not your salary and not your taxable income. Several things are added back in.
- Indexation is now the lower of CPI or WPI, and that change was backdated to 1 June 2023.
- Thresholds and rates change most years, so a figure from an older article may not be the one that applies to you.
What to do with this
Log in to myGov and read three things off your ATO account: the current balance, the indexation applied on 1 June, and whether the 20 per cent reduction shows against your account.
That is a records check, not a money decision. You are the only person holding both your account and your own memory of what you thought you owed, which makes you the only one who can notice a gap between them.
Common questions about HECS and HELP debt
Does a HECS or HELP debt charge interest?
No. Study and training loans do not charge interest. Instead the balance is indexed once a year, on 1 June, against the part of the loan that has been unpaid for more than eleven months. Indexation is set at the lower of the Consumer Price Index or the Wage Price Index, both to the March quarter, under legislation passed in November 2024. The purpose of indexation is to keep the debt at the same real size rather than to charge a price for borrowing, which is what makes it different from interest.
What is the HECS repayment threshold for 2026-27?
For the 2026-27 income year, compulsory repayment is nil until repayment income passes $69,528. Above that the scale is marginal: 15 cents in the dollar between $69,529 and $129,717, then $9,028 plus 17 cents in the dollar between $129,718 and $186,050, then 10 per cent of total repayment income at $186,051 and over. The thresholds are indexed and change most years, so the figure for a later income year will be different.
Is repayment income the same as my salary?
No. Repayment income is the Australian Taxation Office's own term and it means taxable income plus net investment losses, reportable fringe benefits, reportable superannuation contributions and exempt foreign employment income. Because those items are added back in, salary sacrificing into superannuation does not reduce the income figure your study loan repayment is calculated on.
Why did my HECS debt go down?
Two changes are the likely explanation. A one-off 20 per cent reduction was applied to every outstanding student loan balance as at 1 June 2025, before that year's indexation, removing more than $16 billion across more than 3 million people under legislation passed by Parliament on 31 July 2025. Separately, indexation for 1 June 2023 and 1 June 2024 was reduced retrospectively when the indexation formula changed, and the ATO applied the difference back to accounts as an indexation credit. Many people were affected by both.
Should I pay off my HECS debt early?
This page does not answer that question, and nothing here is a recommendation either way. What it can do is set out the mechanism, which has arguments running in both directions. A voluntary repayment made before 1 June reduces the balance that is indexed that year, so it can reduce the amount the balance grows by. Against that, the money is then gone and cannot be recovered, and a study loan carries no interest and no lender, so the trade-off looks different from the one attached to other kinds of debt. Which of those matters more depends on objectives, income, other commitments and circumstances that a page cannot see. A licensed financial adviser, or a free financial counsellor, is the right place to take it.
Does a HECS debt affect how much I can borrow for a home?
A compulsory study loan repayment is an ongoing commitment taken out of income, and lenders assess ongoing commitments when they work out what an applicant can service, so it is one of the factors that can affect an assessment. How much weight it carries varies between lenders and depends on the size of the repayment relative to income. This is general information and not credit advice. A mortgage broker, a financial counsellor or the lender itself is who can explain how a particular application would be assessed.
- Australian Taxation Office: study and training loan repayment thresholds and rates, income year 2026-27; study and training loan indexation rates (ato.gov.au)
- Universities Accord (Student Support and Other Measures) Act 2024: the indexation formula, passed November 2024, backdated to 1 June 2023
- Department of Education: FAQs for HELP indexation credit; FAQs, 20% reduction off all outstanding HELP loan debt (education.gov.au)
- StudyAssist: indexation of 2.8% applied to study loans on 1 June 2026 (studyassist.gov.au)
- Illustrative figures: the coffee jar and the $70,000 repayment are worked illustrations of the published rates, not projections and not estimates of anyone's position
Keep reading: how to read a payslip, how to read your super statement, or find your starting point.