What the HECS: Indexation Increase to 7.1%

Updated May 29th 2023

While many might say that it’s the “best debt you can have”, the recent announcement that indexation on HELP (Higher Education Loan Program) debt, commonly referred to as HECS, is going up to 7.1% from June 1 2023, there’d be a lot of former students now doubting this sentiment.

From 1 June 2023, the indexation rate applied to all study and training loans will increase to 7.1%, up from 3.9% for the previous financial year.

This has resulted in voluntary repayments to HECS/HELP debt almost 60% higher for this financial year up to the end of March 2023 than the previous year, according to the Australian Tax Office (ATO), ahead of indexation changes.

What is indexation?

On 1 June each year, indexation is applied to the part of an accumulated study and training loan that has remained unpaid for more than 11 months, for:

• Higher Education Loan Program (HELP)
• VET Student Loan (VSL)
• Student Financial Supplement Scheme (SFSS)
• Student Start-up Loan (SSL)
• ABSTUDY Student Start-up Loan (ABSTUDY SSL)
• Trade Support Loan (TSL).

The indexation is calculated by using the Consumer Price Index (CPI)–essentially the calculation of the change in the value of goods and services. This is also known as inflation.

Despite common belief, indexation is not a form of interest, given HECS is an interest free loan. Rather the value of that money follows inflation which is calculated annually – that is, the government is not charging you for borrowing money, they just want to be paid back the real value of said money.

How can you minimise the impact of this indexation increase?

According to the ATO, people considering making voluntary repayments should do so by Thursday, May 25 if they want the payment to clear prior to June 1 when accounts are indexed. This will allow ATO systems time to process the repayment via banking systems.

Voluntary payments made after this date may not be processed by ATO systems before June 1 and indexation will be applied to the pre-voluntary payment balance.

To check the balance of your HELP debt and other student loan liabilities visit the ATO’s online service at myGov to view your account.

If you have questions or concerns about how to manage your HELP/HECS debt, contact us for assistance and advice.