Understanding Your HECS Debt in 2025: Indexation, Repayment & Strategy

If you studied at university or a higher-education provider in Australia and deferred your fees, chances are you have a HECS-HELP debt. In 2025, some major updates have arrived that could make a big difference to how your debt grows, how much you pay, and when you start repaying. Let’s break it down in plain English.

What’s New for HECS in 2025?

1. One-off 20% Debt Cut

From 1 June 2025, the Australian Government introduced a one-off 20% reduction to outstanding HELP and HECS-HELP debts.
In simple terms, if your balance was $30,000 on that date, it dropped by around $6,000 before indexation was applied. For the average Australian debt of around $27,600, that means a reduction of about $5,500.

2. Indexation Rate and Cap

Each year, your debt is adjusted by an indexation rate to keep it in line with inflation. In 2025, the rate is 3.2%, which is significantly lower than the 7.1% spike seen in 2023.
Since 2023, indexation has been capped at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI), helping to reduce unexpected jumps in debt growth.

3. Higher Repayment Threshold

The minimum income required before you start making compulsory repayments has increased to around $67,000 for the 2025-26 financial year.
That means if you earn less than this amount, you won’t need to make compulsory repayments yet.

How HECS Debt Works

Indexation

Every year on 1 June, your outstanding HECS balance is adjusted by the indexation rate. This ensures the real value of your debt keeps up with inflation.
For example, if you had a $20,000 debt, it would increase by around $640 with the 2025 rate of 3.2%. Because the 20% debt reduction applies first, you’ll see a smaller base being indexed — meaning your total growth in debt is lower than in previous years.

Repayments

You only begin compulsory repayments once your repayment income exceeds the threshold. The repayment rate then increases gradually based on your income bracket, ranging from around 1% to 10%.
You can also make voluntary repayments anytime if you want to clear your balance faster or reduce future indexation.

How It Affects Borrowing

Your HECS debt can impact how much you can borrow for a home loan, as lenders factor it into your overall debt position. However, the new 2025 changes — particularly the debt reduction — may slightly improve your borrowing power.

Why the 2025 Changes Matter

Whether you’ve just graduated or you’re years into your career, these changes can have real-world benefits:

• Lower debt = more breathing room – With the 20% reduction, your debt has instantly dropped, giving you a head start.

• Less growth from indexation – The smaller balance and capped rate mean your debt won’t balloon like it did in 2023.

• Higher repayment threshold – More of your income stays in your pocket before repayments start.

• Better borrowing potential – A lower debt balance can help improve your financial profile with lenders.

Practical Steps to Take

1. Check Your Current Balance

Log into your MyGov account and confirm your updated HELP/HECS balance. The 20% reduction should have been applied automatically if you had a debt as of 1 June 2025.

2. Understand When Repayments Start

If your income is below $67,000, you won’t have to make compulsory repayments this financial year. If you earn more, check which repayment rate applies to you so you can budget accordingly.

3. Choose a Strategy: Pay It Off or Invest

• Pay it down early – Making voluntary repayments reduces your balance and minimises future indexation. This may be a smart move if you’re planning to buy a home soon or prefer being debt-free.

• Invest instead – If your debt grows at 3.2% and you think you can earn more than that through investments or super contributions, investing your spare cash might yield better returns over time.

• Balance your priorities – There’s no one-size-fits-all answer. Consider your income stability, goals, and comfort with risk before deciding.

4. Keep Track of Changes

Government policies around HECS and HELP can change each year. Stay up to date with announcements around indexation rates, repayment thresholds, or new incentives that could impact you.

What This Means for Most Australians

• Your overall debt load is now lower thanks to the 20% reduction.

• The 2025 indexation rate is more manageable at 3.2%.

• If you earn under $67,000, you won’t need to make repayments yet.

• Whether you repay early or invest depends on your personal goals.

• Keeping an eye on your HECS balance is more important than ever, especially if you’re planning major financial moves like buying a home.

Final Thoughts

The 2025 HECS-HELP changes are a welcome relief for millions of Australians. The one-off 20% reduction, capped indexation rate, and higher income threshold all make managing your student debt a little easier.

But it’s still worth having a plan.
Check your balance, know when repayments kick in, and decide whether you’d rather pay it down or focus on building your savings and investments.

Understanding your HECS debt isn’t just about keeping up with government policy — it’s about making smart financial choices that align with your goals.