Understanding HECS-HELP and the Annual Indexation Process

HECS-HELP, formally the Higher Education Contribution Scheme – Higher Education Loan Program, allows eligible Australian students to defer payment of their university fees through a government-supported loan. The scheme, administered under the Higher Education Support Act 2003, has supported millions of students since its introduction in 1989. Each year on 1 June, the Australian Taxation Office applies indexation to the portion of a HELP debt that has remained unpaid for more than 11 months. This adjustment reflects changes in the cost of living and ensures the real value of the debt is maintained over time.

In 2026, indexation was set at 2.8 per cent, the lowest rate since 2021. This figure results from legislation passed in late 2024 that caps indexation at the lower of the Consumer Price Index or the Wage Price Index. The change, backdated to 2023, prevented sharper increases seen in previous years when CPI outpaced wages. Approximately three million students and graduates saw their combined debts rise by more than one billion dollars on 1 June 2026.

Recent Policy Changes and the 20 Per Cent Debt Reduction

The Universities Accord (Student Support and Other Measures) Act 2024 introduced significant reforms, including a one-off 20 per cent reduction in outstanding HELP balances applied in 2025. This measure, combined with the new indexation formula, provided immediate relief for many borrowers. The reduction was calculated on balances as at 1 June 2025 before indexation was applied, and the ATO automatically adjusted accounts for eligible individuals.

These reforms followed recommendations from the Universities Accord review and aimed to make the system fairer, particularly for lower-income graduates. The minimum repayment threshold for the 2026–27 income year rose to approximately $69,528, with repayments now calculated only on income above successive thresholds rather than the entire salary.

Impacts on Current University Students and Recent Graduates

Many students at institutions such as the University of Melbourne, University of Sydney, Monash University and the University of Queensland are feeling the cumulative effects. Even with repayments, debts for those earning below the threshold can grow. Analysis shows that some graduates on modest salaries saw their balances higher after indexation than two years earlier, despite making compulsory contributions.

The increase adds pressure on housing affordability, career mobility and mental wellbeing. University administrators report rising enquiries from students concerned about long-term financial commitments when choosing courses or considering postgraduate study.

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Perspectives from Students, Universities and Policy Makers

Student organisations have highlighted the disproportionate impact on first-generation and regional students. University leaders note that while the lower indexation rate is welcome, ongoing cost-of-living pressures continue to affect enrolment decisions and completion rates.

Independent MP Monique Ryan and others have called for shifting the indexation date away from 1 June to reduce the burden. Costings suggest such a change could save graduates more than three billion dollars over a decade. The Department of Education emphasises that the current framework balances the need to maintain the value of public investment in higher education with borrower protections.

Broader Effects on Australian Higher Education

HECS-HELP indexation influences enrolment patterns, course choices and the attractiveness of Australian universities to domestic students. With total HELP debt exceeding $40 billion, the system remains central to funding models at public universities. Regulatory bodies such as TEQSA monitor quality and student outcomes while the Department of Education oversees loan administration.

International comparisons show Australia’s income-contingent loan model is still regarded as relatively progressive, yet recent indexation spikes have prompted renewed debate about sustainability and equity.

Practical Steps for Students and Graduates

Borrowers can check their balance and indexation history through myGov linked to the ATO. Voluntary repayments before 1 June each year reduce the balance subject to indexation. Those nearing repayment thresholds should model different income scenarios using the official HELP debt estimator on the Department of Education website.

University careers services and financial counsellors at institutions across the country offer guidance on managing debt alongside other financial goals such as home ownership or further study.

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Future Outlook and Potential Reforms

With inflation moderating, the 2.8 per cent rate for 2026 represents a stabilisation. However, advocates continue to push for additional measures, including further adjustments to repayment thresholds or alternative indexation timing. The Universities Accord process highlighted the need for ongoing monitoring of student debt levels and their impact on workforce participation.

Policy discussions in 2026 are likely to focus on balancing fiscal responsibility with support for the next generation of graduates entering a competitive labour market.

Resources for Further Information

Official guidance is available from Study Assist and the Australian Taxation Office. University websites provide course-specific advice on fee structures and HELP eligibility. Students considering study in 2027 should review the latest Commonwealth supported place information and repayment thresholds well in advance.