HECS Repayment 2025-26: New $67,000 Threshold, Marginal Rates & 20% Debt Cut Explained

If you have a HECS-HELP debt, 2025-26 is the most important year in decades for your student loan. A new $67,000 minimum threshold, a fairer marginal repayment system, and a one-off 20% debt reduction mean most Australians will pay significantly less — or nothing at all — this financial year. Here's exactly how the changes work and what they mean for your take-home pay.

1. What changed in 2025-26?

The 2025-26 financial year brought the most significant reforms to the HECS-HELP repayment system since it was introduced. The Australian Government made three major changes:

• Raised threshold: The minimum income before repayments start jumped from $54,435 to $67,000 — an increase of more than 23%.
• Marginal repayment system: Repayments are now calculated only on income above the threshold, not on your total income.
• 20% debt reduction: A one-off 20% cut was automatically applied to all outstanding HELP balances as of 1 June 2025.

2. The new $67,000 repayment threshold

The single biggest change in 2025-26 is the threshold increase. Under the old rules, if your income was above $54,435, you had to start repaying your HECS debt — calculated as a percentage of your entire income. Now:

• If your repayment income is $67,000 or less, no compulsory repayment is required.
• If you earned between $54,435 and $67,000 last year, you paid HECS in 2024-25 — but in 2025-26, you pay zero.

Repayment income is broader than just your taxable income. The ATO calculates it by adding together: taxable income (excluding FHSS released amounts), reportable fringe benefits, total net investment losses (including rental losses), and reportable employer super contributions.

3. How the marginal rate system works

The old system was a "cliff" system: once you crossed the threshold, you paid a rate on your entire income. This created unfair situations where a small pay rise could actually leave you worse off, because it pushed you into a higher HECS bracket that applied to all your earnings.

The new system is marginal — just like income tax brackets. You only pay HECS on the income above each threshold. Here's how the three tiers work:

The top tier (above $179,286) remains a flat 10% of total income, not a marginal rate. This affects only high earners and is unchanged from the previous system.

4. Full repayment amount table 2025-26

Here's what you'll actually pay under the new 2025-26 system at common income levels, compared with what you would have paid previously:

Source: Australian Government, Department of Education. Figures are estimates; your exact repayment is confirmed by the ATO after lodging your tax return.

5. Real-world examples: before vs after

Example 1 — Teacher earning $80,000

Example 2 — Graduate nurse earning $65,000

Example 3 — Software developer earning $130,000

6. The 20% HELP debt reduction explained

Separate from the repayment rate changes, the Australian Government legislated a one-off 20% reduction to all outstanding HECS-HELP, FEE-HELP, VET Student Loan, and other study loan balances.

• The reduction was applied automatically by the ATO to balances outstanding as of 1 June 2025.
• No action was required — you didn't need to apply or notify anyone.
• The 20% cut was applied before the annual indexation of 3.2% (also applied 1 June 2025).
• If your debt was $30,000 on 1 June 2025, it became $24,000 before indexation was added.

You can check your current HELP balance at any time via the ATO on myGov.

7. How does this affect my actual take-home pay?

Your employer withholds extra tax throughout the year to cover your estimated HECS repayment (via PAYG). The 2025-26 changes mean your employer should withhold a smaller additional amount — boosting your fortnightly or weekly take-home pay.

For example, someone earning $80,000 whose employer withheld the old $2,800 per year ($107 per fortnight) now should only have about $1,950 withheld ($75 per fortnight) — an extra $32 per fortnight in hand.

The ATO reconciles the exact amount when you lodge your tax return. If your employer over-withheld (common in the first year of new rates), you'll receive a refund.

For a full breakdown of all income tax brackets in 2025-26 (including the Stage 3 tax cuts that began 1 July 2024), see our Tax Refund Calculator.

8. Should I make voluntary HECS repayments?

Voluntary HECS repayments are worth considering if you want to reduce your loan balance faster, but the calculus changed significantly in recent years.

The case for making voluntary repayments

• Reduce indexation exposure: The 2025 indexation rate was 3.2%. Making a voluntary repayment before 1 June each year reduces the balance on which indexation is calculated.
• Peace of mind: Some people prefer to clear the debt faster, particularly before buying a property or taking parental leave.
• No interest charges: HECS-HELP doesn't charge interest, just indexation — so there's no penalty for waiting, but there's also no investment return from delay.

The case for not rushing

• With indexation capped at the lower of CPI or Wage Price Index, the "interest rate" on HECS is often below what you'd earn in a high-interest savings account or offset account.
• Extra mortgage repayments, building an emergency fund, or topping up super may be higher priority.

Frequently asked questions

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