How does HECS-HELP indexation work and can I pay it off early?

HECS-HELP (and other HELP debts) are indexed each year on 1 June using the Consumer Price Index (CPI). The indexation rate is based on the percentage change in the March quarter CPI compared to the March quarter of the previous year. In 2023, indexation hit 7.1%, the highest in decades, which caused significant public concern. The government subsequently introduced a cap so that indexation cannot exceed the Wage Price Index (WPI) if it is lower.

You repay HECS-HELP through the tax system once your income exceeds the compulsory repayment threshold, which for 2024-25 is $54,435. Repayment rates are between 1% and 10% of your income depending on how much you earn. These are automatically withheld by your employer if you declare a HELP debt on your tax file number declaration.

You can make voluntary repayments at any time through your myGov account or by contacting the ATO. There is no prepayment bonus; the 5% bonus for voluntary repayments was abolished in 2017. Whether to pay down your HECS-HELP debt early depends on the indexation rate compared to other uses of your money. In low-CPI years, HECS-HELP is very cheap debt. In high-CPI years, paying it down faster makes more financial sense.