How to pay off your HECS debt: the ultimate guide

September 25, 2024

HECS debt isn’t the most fun part of higher education. But it doesn’t have to be a headache. Here’s your ultimate guide to repaying your HECS-HELP loan.

A huge proportion of higher education students in Australia take out a HECS-HELP loan from the government to cover their studies.

While repaying your HECS debt may not be the most appealing subject to think about, it’s a good idea to know how to do it and how much you’ll be paying each year, especially when cost of living is starting to bite. 

This guide will run you through the ins and outs of making repayments. If you’d like more info on what exactly a HECS-HELP loan is, you may like to see our other guide on how HECS works.    

How to check your HECS debt

It’s worth keeping an eye on your HECS-HELP loan balance from time to time, to make sure your repayments are being applied properly. 

You can easily check the balance by logging onto the MyGov website and heading to the Australian Taxation Office (ATO) section. This will display your remaining HELP balance and any payments you or your employer have made, as well as the indexation to the loan that is applied each year. 

How to pay off your HECS

There are multiple ways to make repayments to your HECS-HELP loan. Let’s see which applies to you. 

Compulsory repayments

When you are earning a salary from an employer, repayments will automatically be made towards your HECS debt on your behalf. These are withheld from your wages and lodged to the ATO at the end of the year, after you’ve submitted your tax return. 

If you have a HECS debt, you need to make sure you have told your employer this, so they know to withhold amounts from your pay. 

If you are self-employed and earning over the income threshold, you will also make compulsory payments. These will be calculated by the ATO when you submit your tax return each year—so make sure you prepare for that! 

Voluntary repayments 

If you are earning below the income threshold or would like to make additional repayments on top of the compulsory ones, you can make your own contributions to your HECS-HELP loan balance. 

To do this, you can log into the ATO section of the MyGov website and make a payment through the site, via credit card or BPAY. 

Can you salary sacrifice HECS debt? 

Yes, you can set up a salary sacrificing arrangement with your employer to go towards your HECS-HELP loan. This means you’ll be redirecting some of your wages to go towards the debt—which is considered a voluntary repayment—and reducing your taxable income as a result. 

You’ll need to have a chat with your employer to see if they’ll agree to this, though, and make sure you seek advice from a financial adviser to see if it’s a good idea for you. This may be considered a fringe benefit, which could result in fringe benefit tax, so it could get a little complex. 

What is the HECS repayment threshold? 

The amount of HECS debt you repay each year is based on the income you have earned.

Here are the current HECS-HELP repayment rates, for the 2024-2025 financial year. 

Keep in mind that these rates can change from year to year. You can use the HECS repayment calculator on the ATO website to get an estimate of your HECS repayment amount.

Should you pay off your HECS debt early?

There’s no right answer to this question—it’s really up to you. While you don’t have to pay interest on a HECS debt, it is 'indexed'. This means it goes up slightly each year depending on inflation (you can learn more about that in our how HECS works guide). So, if you’re able to make extra repayments to your HECS debt, you may like to consider it.

Something to stay mindful of is that your HECS-HELP debt may be taken into consideration if you're applying for another loan, such as a home loan. This is not necessarily a barrier to securing a loan, though. If you want to know more about this, it’s best to seek financial advice specific to your own circumstances, such as by chatting to a mortgage broker.

Why is my HECS debt not going down?

If your HECS-HELP debt isn’t going down or—gulp—is going up, there could be a few reasons for this.

Firstly, you may not meet the income threshold to be making repayments, in which case you’re not obligated to start repaying the debt.

If you do earn over the threshold, there’s a chance your employer is in the wrong by not making the repayments for you. You should raise this with them and/or the ATO.

If your debt is going up, this is likely due to the indexation that is applied to the loan each year, on 1 June. This happens to adjust the value of the debt in line with inflation. When you don't make repayments, or you do but they’re small, the annual indexation can outpace your payments, pushing your debt up.

This can be frustrating, but keep in mind there’s no deadline to pay off your loan. Your income will change as you gain experience throughout your career. While you might not earn a high enough income to pay off much in one year, you could make a sizeable dent in the next. The upcoming changes to indexation will also keep any yearly increases low going forward. 

What happens when you pay off your HECS debt?

Aside from getting a warm and fuzzy feeling of satisfaction, you’ll gain greater financial freedom. When you pay off your HECS debt, you can set your sights on other financial goals.

Since it won't need to be deducted from your pay anymore, you'll also probably feel like you've gotten a raise!

When you realise you’ve paid off your HECS, you need to inform your employer by completing a new ‘withholding declaration’ form from the ATO, so they know to stop deducting payments. If you’ve accidentally overpaid your debt, don't worry, because you’ll be refunded this amount by the ATO when you file your next tax return. 

Where to get advice on repaying your HECS

If you want advice that’s specific to your circumstances, you can consult a financial expert, such as a financial planner or adviser.

You can also always book a phone chat with the friendly support team at Open Universities Australia, who will be able to point you in the right direction. 

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