Two changes have reshaped student loan repayments in Australia, and both land on the return you lodge for the year ended 30 June 2026. The way compulsory repayments are calculated switched to a marginal bracket system on 1 July 2025, and every outstanding balance was cut by 20 percent before the last round of indexation. If you finished a degree in the past decade and still carry a HECS-HELP debt, the amount coming out of your pay this year is smaller than the old rules would have taken, and the balance itself is lower too. Here is how the 2026 arithmetic works.
The old cliff, and why it is gone
Under the system that ran until 30 June 2025, a single repayment rate applied to your entire income once you crossed a threshold. Earn a dollar over a band and that whole band’s percentage hit every dollar you made, not just the part above the line. A modest pay rise near a threshold could cost hundreds of dollars, because the higher rate reached back across your full income. People called these the repayment cliffs, and they made the effect of overtime or a bonus hard to predict.
From 1 July 2025 the calculation mirrors income tax instead. Each rate applies only to the income inside its band, so a raise never claws back what you already earned below it. The result is a smoother curve and a repayment figure you can actually forecast before payday.
The 2025-26 brackets
For the 2025-26 income year the compulsory repayment is worked out on repayment income above a $67,000 floor, up sharply from $54,435 the year before.
| Repayment income | Compulsory repayment |
|---|---|
| Up to $67,000 | Nil |
| $67,001 to $125,000 | 15c for each $1 over $67,000 |
| $125,001 to $179,285 | $8,700 plus 17c for each $1 over $125,000 |
| $179,286 and above | 10% of your whole repayment income |
The fixed amounts join up cleanly. At $125,000 the first band has built up to 15c on $58,000, which is exactly the $8,700 the second band starts from, so there is no jump as you move across. Only the very top band reverts to charging the rate on your whole income, and it starts where that sum roughly matches what the marginal build-up would have reached anyway.
A few worked figures show the shape:
- On $80,000 the repayment is 15 percent of $13,000, which is $1,950 for the year, close to $37.50 a week.
- On $95,000 it is 15 percent of $28,000, or $4,200.
- On $130,000 it is $8,700 plus 17 percent of $5,000, which comes to $9,550.
- On $200,000 the top band applies, so it is 10 percent of the full $200,000, or $20,000.
You can reproduce any of these with the percentage calculator, and because the repayment tracks your salary you can see the take-home effect alongside income tax and the Medicare levy in the Australia salary and tax calculator.
The 20% one-off reduction
Separately from the repayment change, the Universities Accord (Cutting Student Debt by 20 per cent) Act 2025, passed in July 2025, cut every HELP and study loan balance by 20 percent. The reduction applied to the amount owing as at 1 June 2025, and it was taken off before that year’s indexation was added, so it shrank the base that indexation then grew. A $30,000 balance fell by $6,000 to $24,000; a $50,000 balance fell by $10,000. Nobody had to apply. The ATO adjusted accounts automatically, and where the cut left someone in credit or having overpaid, refunds and credits were processed through late 2025 and into early 2026.
Indexation still happens each year on 1 June, at the lower of the Consumer Price Index and the Wage Price Index since the 2024 reform. The 2025 rate was 3.2 percent, and crucially it was calculated on the already-reduced balance rather than the original one. A voluntary repayment made before 1 June therefore lowers the figure that next year’s indexation applies to, which is the main reason to consider paying extra before that date.
What counts as repayment income
Compulsory repayments are not worked out on your salary alone. Repayment income is your taxable income plus any total net investment losses, reportable fringe benefits, reportable super contributions, and exempt foreign employment income. That means salary sacrifice into super or a negatively geared investment does not shrink the figure your repayment is measured against, even though it lowers your taxable income. Two people on the same wage can face different repayments once these add-backs are counted.
The 2026-27 thresholds
The bands are indexed to average weekly earnings each year, so they climb with wages. For the 2026-27 income year the floor rises to $69,528, and the brackets shift up in step.
| Repayment income | Compulsory repayment |
|---|---|
| Up to $69,528 | Nil |
| $69,529 to $129,717 | 15c for each $1 over $69,528 |
| $129,718 to $186,050 | $9,028 plus 17c for each $1 over $129,717 |
| $186,051 and above | 10% of your whole repayment income |
Because the floor moves up, someone whose pay stays flat pays a little less each year in real terms. On $100,000 the 2025-26 repayment is 15 percent of $33,000, or $4,950, while for 2026-27 it is 15 percent of $30,472, or about $4,571.
How the money actually reaches the ATO
There is no separate bill to pay. The compulsory repayment is calculated when you lodge your tax return and settled through your assessment. To avoid a lump sum at tax time, tell your employer you have a study loan so they withhold extra PAYG tax through the year, which is then credited against the repayment. If a pay rise pushes you into a higher band, checking the difference with the pay rise calculator or the income tax calculator helps you set aside the right amount rather than being caught short.
FAQ
What is the HECS-HELP repayment threshold for 2025-26? Compulsory repayments start once repayment income passes $67,000. Below that, nothing is due. Above it, 15c applies to each dollar over the floor, rising to 17c past $125,000 and 10 percent of the whole income above $179,286.
Did my HECS debt really drop by 20 percent? Yes. The 20 percent cut applied to balances as at 1 June 2025, before that year’s indexation, and the ATO made the adjustment automatically. A $25,000 debt became $20,000.
Does the marginal system mean I pay less? For most incomes, yes, because the rate now applies only to income above each threshold rather than to your whole income. The biggest relief is around the old cliff points, where a small raise used to trigger a large jump.
What is repayment income? Taxable income plus reportable fringe benefits, reportable super contributions, total net investment losses and exempt foreign employment income. Salary sacrifice and investment losses do not reduce it.
When should I make a voluntary repayment? Before 1 June if you want to cut the balance that this year’s indexation is applied to. Indexation is now added after any voluntary payment, so paying early reduces the amount that gets indexed.
Sources
- Australian Taxation Office, Study and training loan repayment thresholds and rates.
- Australian Taxation Office, Study and training loans, what’s new.
- Department of Education, Reductions to HELP debt and other student loans.
- Study Assist, Government announces changes to HELP debt repayments.