How Does the HECS-HELP Loan System Work in Australia?
Understand Australia's HECS-HELP loan: from its unique structure and funding higher education to its indexed repayment process.
HECS-HELP, or the Higher Education Contribution Scheme – Higher Education Loan Program, is a financial support system provided by the Australian Government. This scheme assists eligible students in paying their tertiary education tuition fees. Its primary purpose is to enhance access to higher education by allowing students to defer the immediate cost of their studies.
This financial assistance is structured as a loan directly from the Australian Government. An important characteristic of HECS-HELP is that it does not accrue real interest. Instead, the loan balance is adjusted annually to account for inflation, ensuring its value is maintained over time.
Becoming Eligible for HECS-HELP
Qualifying for a HECS-HELP loan requires meeting specific criteria related to citizenship, residency, and enrollment status. Prospective students must generally be Australian citizens who will undertake at least some of their course of study while living in Australia. Certain New Zealand Special Category Visa (SCV) holders or eligible former New Zealand SCV holders who meet long-term residency requirements and study entirely in Australia may also qualify. Permanent humanitarian visa holders, or eligible former permanent humanitarian visa holders, who reside in Australia for the duration of their studies are also eligible.
Beyond citizenship and residency, students must be enrolled in a Commonwealth supported place (CSP) at an eligible higher education provider. A CSP signifies a government-subsidized enrollment where the Australian Government contributes a portion of the tuition fees directly to the institution, reducing the student’s personal contribution.
Additionally, to be eligible for HECS-HELP, individuals must possess a Tax File Number (TFN) and a Unique Student Identifier (USI). The TFN is a personal identification number issued by the Australian Taxation Office (ATO), and the USI is a lifelong individual education number. Both are mandatory and must be provided to the educational institution.
Applying for and Receiving HECS-HELP
Once eligibility for HECS-HELP is established, the formal process of accessing the loan begins. Students must complete a Request for Commonwealth Assistance form, often referred to as an electronic Commonwealth Assistance Form (eCAF). This form is typically provided by the university or higher education provider.
The eCAF is a legal document where students accept the conditions of their Commonwealth supported place and indicate their choice to defer payment through HECS-HELP. It is crucial to submit this form by the “census date,” which is the legal deadline for each study period. Failure to submit the eCAF by this date can result in the student being ineligible for the loan for that study period, requiring them to pay fees upfront or risk enrollment cancellation.
After the census date passes and the eCAF is successfully submitted, the HECS-HELP loan amount is applied directly to the student’s tuition fees. This reduces the student’s immediate financial obligation by covering their student contribution. The government pays this amount directly to the university on the student’s behalf.
Managing Your HECS-HELP Loan
After a HECS-HELP loan is applied to tuition fees, its management primarily involves understanding the concept of “indexation.” Debts are indexed annually to ensure the debt maintains its real value in alignment with changes in the cost of living.
Indexation is applied to the outstanding loan balance on June 1st each year. The rate of indexation is determined by the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). This adjustment reflects changes in inflation or wages, preventing the loan’s value from eroding over time. For instance, the indexation rate applied on June 1, 2023, was reduced from 7.1% (CPI) to 3.2% (WPI), and for June 1, 2024, it was reduced from 4.7% (CPI) to 4.0% (WPI).
The Australian Taxation Office (ATO) is responsible for calculating and applying this indexation. Students can monitor their HECS-HELP debt balance, including applied indexation and repayments, through their myGov account linked to the ATO’s online services. This online portal provides a real-time figure of the outstanding debt.
Repaying Your HECS-HELP Debt
Repayment of a HECS-HELP debt occurs primarily through the Australian tax system. Compulsory repayments commence once an individual’s “repayment income” reaches a predetermined threshold. This repayment income includes not only taxable income but also other components like net investment losses, reportable fringe benefits, and superannuation contributions.
The compulsory repayment threshold is adjusted annually, and the repayment rate is calculated as a percentage of the repayment income, increasing with higher income brackets. For the 2024-25 financial year, the minimum repayment threshold is $54,435. As of the 2025-26 income year, the threshold is $67,000, and compulsory repayments will be calculated using marginal rates, meaning only income above the threshold contributes to the repayment amount.
Employers typically withhold additional tax from an employee’s pay if they have a HECS-HELP debt, which goes towards the compulsory repayment. However, these withheld amounts are not applied to the loan balance until the individual lodges their annual tax return, at which point the ATO calculates the exact compulsory repayment due. If an individual is self-employed, they will calculate their compulsory payments when lodging their tax return.
Individuals also have the option to make voluntary repayments directly to the ATO at any time. These voluntary payments are immediately credited against the loan balance, reducing the outstanding debt. Making voluntary repayments, especially before the annual indexation date of June 1st, can lead to a smaller amount being indexed, potentially saving money over the life of the loan. A 20% reduction applies to all eligible HECS-HELP and other study and training loans that existed on June 1, 2025. This reduction is applied before indexation on that date, and indexation is then recalculated on the reduced loan amount, with any excess indexation credited back to the loan.