Each year student loans increase due to indexation. But how does it work and what are its implication for a student's financial future?
June 1 is the start of winter for all Australians.
For students, it was also the date of the annual indexation of all HELP loans. It means that three million young Australians saw their student debt increase by 2.8 per cent this year, and many may not realise it.
What is HELP debt indexation?
The Higher Education Loan Program (HELP) is Australia’s student loan system, and it allows students to delay the repayment of their education fees (HECS) until they are earning a certain income.
Currently the salary threshold is $69,528. So once you're earning more than this, your take home pay will be reduced by $0.15 for every dollar to repay the debt.
Like all proportional income tax processes, the higher the salary, the larger the compulsory repayments.
So that deduction bumps up to $0.17 deducted for every dollar over $129,717 earnt.
But there’s something else pushing up student debt, namely indexation.
The HELP scheme is appealing because it is essentially interest free. Instead, the sum is adjusted according to the Consumer Price Index (CPI) or Wage Price Index (WPI) each year, depending on which is lower. This inflation-based approach means the loan does not depreciate or lose value, and can instead be maintained in line with the purchasing power of the dollar.
Unfortunately, it means borrowers who contribute extra to loan repayments could see their overall student debt rise again with the next annual indexation.
What happens when I graduate?
Employees only have to start repaying the loan when their salary passes $69,528. There is no given time frame regarding how soon the debt needs to be paid off, however research by the Australian Institute found that the average holder requires 10 to 15 years to do so.
But while time may not be a constraint, a HELP debt could impact a home loan application. When you apply, the bank will evaluate your borrowing power according to your disposable income, ie how much money you bring home after debt repayments including HELP.
So the higher your HELP debt, the lower your disposable income – and your borrowing power.
This will restrict the value of your potential home loan, which could limit your capacity to invest in real estate.
There was some respite for this in 2025.
The federal treasurer, Jim Chalmers, requested financial regulators APRA and ASIC inform banks that disregarding student loans in mortgage applications was now acceptable if HELP debts were small enough to be repaid quickly.
However Anna Bligh, the head of Australian Banking Association, said these new guidelines would only apply to people who could pay off their loan within a year.
This is likely to be the case for debts of $10,000 - $20,000, with many banks, including the National Australian Bankusing these figures as their own regulations.
What else should I know?
There isn’t much you can do when it comes to managing your HELP loan.
While there are some exceptions (see below), most sectors do not offer reductions or waivers. And the rate of indexation will fluctuate according to inflation each year.
Such unpredictability is something to keep in mind when thinking about your financial future.
Additionally, borrowers should remain aware of the HELP loan limit, especially if they plan on completing post-graduate studies. The current loan limit for most students is $129,883 or $186,544 for those studying medicine, dentistry, veterinarian science and certain aviation courses.
Most students will not have to address their HELP loan repayments while they are studying. But it shouldn't be forgotten, particularly when passing the census date each term.
Who is eligible for indexation waivers?
Some professions do have options when it comes to indexation waivers.
Since early 2022, the federal government has incentivised education and healthcare workers to relocate and work in rural or remote areas with the offer of HELP debt reductions or indexation waivers.
Eligibility for this financial aid depends on the number of days worked within a period in those areas.
Visit the government’s HELP for graduates site for full details.
So what does your student loan look like now?
This year’s increase of 2.8 per cent is the lowest indexation rate since 2021.
Here are some approximate examples* of what student debts could look like after the increase:
- $20,000 = $20,560
- $40,000 = $41,120
- $70,000 = $71,960
To find out your new HELP balance, use the equation: (HELP balance May 31, 2026) x 1.028 = New HELP balance
*Figures provided by atotaxcalcuator.
