Local guide: Australia / English. AUD examples only. Loan rules were checked against ATO and Department of Education pages on 30 September 2026.
Should you pay off your HECS-HELP debt early with spare cash, or keep that cash in savings or a home loan offset account? You need your HELP balance, the lump sum, an indexation estimate, the rate the cash would earn or save, and your tax rate. The answer covers money only; it cannot price flexibility.
In short, a voluntary repayment is worth the indexation it avoids, and the rate applied on 1 June 2026 was 2.8%. Cash in a savings account earns interest that is taxed. Compare both after tax, over the same year, before sending money you cannot get back.
HECS-HELP lump sum: repay now or keep the cash?
Compare the indexation a voluntary repayment avoids with the interest the same cash would earn or save over one year, and see a rough compulsory repayment timeline at your income.
One-year view. Indexation is applied on 1 June to debt unpaid for more than 11 months; the next rate is not known in advance, so enter your own estimate. Compulsory repayments use the ATO 2026-27 marginal thresholds. Years left ignore indexation and pay rises.
This tool runs in your browser. Your entries are not sent or saved. All amounts are in Australian dollars (AUD).
Load example fills hypothetical figures. They are not current rates or recommendations.
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What does a voluntary HECS repayment actually save?
A HELP debt does not charge interest. Instead, on 1 June each year the ATO applies indexation to the part of your loan that has been unpaid for more than 11 months. The rate is the lower of the Consumer Price Index (CPI) and the Wage Price Index (WPI).
The ATO's indexation table shows 2.8% for 2026, 3.2% for 2025 and 4% for 2024 after the cap was applied. A repayment that is processed before 1 June takes that money out of the balance being indexed, so the saving is roughly the lump sum multiplied by the next rate.
That next rate is not known when you pay. The ATO works it out each year after the December CPI and WPI figures are released, so any figure you enter for next June is an assumption. Test a lower and a higher value before you decide.
The one-off 20% cut to student debt has already happened. The Department of Education says the ATO has finished processing the reductions, so it is not a reason to wait, and it is not a yearly discount you can plan around.
How do you compare indexation with savings interest?
The ATO treats interest from a bank or other financial institution as part of your assessable income. So the fair test is indexation avoided against interest you keep after tax, not the headline rate on a savings account.
For one year the formulas are simple. Indexation avoided equals the lump sum × the indexation rate. Interest kept equals the lump sum × the savings rate × (1 − your marginal tax rate). Whichever number is larger wins for that year.
A shortcut is the break-even savings rate: the indexation rate ÷ (1 − your marginal tax rate). If the ongoing rate on your savings, before tax, sits below that figure, the voluntary repayment comes out ahead on money alone.
| Marginal tax rate | Indexation 2.8% (the 2026 rate) | Indexation 3.2% (the 2025 rate) | How to read it |
|---|---|---|---|
| 0% | 2.80% | 3.20% | No tax on interest, so compare the rates directly |
| 17% | 3.37% | 3.86% | Savings must pay more than this before tax to beat repaying |
| 32% | 4.12% | 4.71% | Used in the worked example below |
| 39% | 4.59% | 5.25% | Higher tax lifts the rate your savings need |
| 47% | 5.28% | 6.04% | Few ongoing savings rates clear this level |
The tax rates in the table are examples, not a statement of your bracket. Check the ATO's current resident tax rates and add the Medicare levy if it applies to you, then use your own rate in the calculator.
What does a hypothetical example look like?
Hypothetical example: your HELP balance is A$24,000 and you have A$10,000 you could repay. You assume next June's indexation will match the 2026 rate of 2.8%. The cash would otherwise sit in a savings account paying 4.50%, and your marginal rate including the Medicare levy is 32%.
- Indexation avoided: A$10,000 × 2.8% = A$280.00.
- Interest before tax: A$10,000 × 4.50% = A$450.00.
- Interest kept after tax: A$450.00 × (1 − 0.32) = A$306.00.
- Result: keeping the cash is ahead by A$306.00 − A$280.00 = A$26.00 for the year.
- Break-even savings rate: 2.8% ÷ 0.68 = 4.12%, so 4.50% only just clears it.
Now change one input. If the ongoing savings rate falls to 3.00%, interest kept is A$10,000 × 3.00% × 0.68 = A$204.00, and repaying comes out ahead by A$280.00 − A$204.00 = A$76.00. A small rate change flips the answer.
What to check: whether the 4.50% is an ongoing rate or a bonus rate with monthly conditions, and whether you would really leave the A$10,000 untouched for the whole year. A gap of A$26 is small enough that flexibility may matter more than the arithmetic.
What if the cash would sit in a home loan offset account?
Moneysmart explains that the balance in an offset account reduces the amount of your home loan that is charged interest. The benefit is interest you do not pay, rather than interest paid to you, so the calculator does not apply your tax rate in offset mode.
Using the same hypothetical A$10,000 against a home loan charging 6.00%, the offset saves about A$10,000 × 6.00% = A$600.00 a year. That beats the A$280.00 of indexation avoided by A$320.00, and the cash stays available if something goes wrong.
Two checks matter here. Moneysmart warns that an offset account that is not linked properly may not reduce your interest, so confirm the saving shows on your statements. If the loan is for an investment property, the tax position is different, so get advice before relying on this comparison.
How do compulsory repayments change the picture?
Compulsory repayments are worked out on your repayment income, not on your balance. From the 2025–26 income year they use marginal rates, so only income above the minimum threshold counts. The ATO's 2026–27 table is below.
| Repayment income | Compulsory repayment |
|---|---|
| A$0 to A$69,528 | Nil |
| A$69,529 to A$129,717 | 15c for each A$1 over A$69,528 |
| A$129,718 to A$186,050 | A$9,028 plus 17c for each A$1 over A$129,717 |
| A$186,051 and over | 10% of total repayment income |
Repayment income is more than taxable income. The ATO adds reportable fringe benefits, total net investment loss, reportable super contributions and exempt foreign employment income, so salary sacrifice into super can still count towards your repayment.
Hypothetical example: with repayment income of A$85,000, the 2026–27 compulsory repayment is (A$85,000 − A$69,528) × 15% = A$15,472 × 0.15 = A$2,320.80. At that pace, A$24,000 takes about 10.3 years and A$14,000 about 6.0 years, ignoring indexation and pay rises.
One detail changes how people read their payslips. The ATO says the extra tax your employer withholds for your loan is not applied to your balance after each pay; it is applied only after you lodge your tax return and the repayment is assessed. Withholding during the year does not shrink the balance indexed on 1 June.
A voluntary repayment also does not reduce your compulsory repayment while a debt remains and your income is above the threshold. What it does is shorten the number of years those deductions continue, which the calculator shows as a rough before-and-after timeline.
Why does the timing of a voluntary repayment matter?
The ATO says you can make voluntary repayments at any time, but they are not refundable. If you want to beat indexation, the payment has to be received and processed before 1 June. Electronic and Australia Post payments can take up to 4 business days to appear on your ATO account.
If you plan to clear the whole balance, the ATO suggests paying before you lodge your tax return. Otherwise a compulsory repayment may still be included on your notice of assessment. Voluntary repayments you make yourself are not tax deductible.
Before any lump sum leaves your account, confirm that your emergency buffer and upcoming bills are still covered. The household budget and fixed bills review can help you see what the next few months really need.
When does paying off HECS early not fit?
- You have no emergency buffer. A voluntary repayment cannot be refunded, so cash you might need within the year is usually safer kept accessible.
- You carry debt that charges interest. Compare its rate with indexation first. A credit card or personal loan charging far more than 2.8% costs more to hold than a HELP balance.
- A big cost is coming soon. If you are about to move or pay a bond, plan that cash first with the moving out costs plan.
- You are applying for a home loan. Lenders can treat a HELP debt differently in borrowing assessments, so ask the lender or broker how your balance is counted before paying it down for that reason.
- Your income is well below the threshold. With no compulsory repayment, the debt still grows with indexation, so the savings comparison above still applies, but keeping a cash buffer may matter more.
How the calculator works and what it leaves out
The tool compares one year only. Indexation avoided is the lump sum × your indexation estimate. Interest kept is the lump sum × your rate, reduced by your tax rate in savings mode only. Each amount is rounded to the cent before the difference is taken.
The compulsory repayment uses the ATO's 2026–27 marginal thresholds and your whole-dollar repayment income. The years-left figure is the balance ÷ that yearly repayment, rounded to one decimal place. It ignores indexation, pay rises and changes to future thresholds, so treat it as a rough guide.
It also ignores the 11-month rule for new debt, fees on savings or offset accounts, and any change to your borrowing capacity. It does not model investing the cash, because investment returns are not certain.
Quick decision checklist
- Read your current HELP balance in your ATO account through myGov before choosing a lump sum.
- Use your ongoing savings or home loan rate, not an introductory or conditional bonus rate.
- Test next June's indexation at a lower and a higher rate than 2.8%.
- Keep your emergency buffer separate; a voluntary repayment cannot be refunded.
- If you repay, allow at least 4 business days before 1 June and keep the receipt.
Sources, scope and editorial note
- ATO: Study and training loan indexation rates. Used for: 1 June indexation, the 11-month rule, the lower of CPI and WPI, and the 2026, 2025 and 2024 rates.
- ATO: Voluntary repayments. Used for: repayments at any time, not refundable, processing before 1 June, paying before lodging, no deduction.
- ATO: Study and training loan repayment thresholds and rates. Used for: the 2026–27 marginal thresholds and what counts as repayment income.
- ATO: Compulsory repayments. Used for: withholding applied only after assessment, and voluntary repayments not reducing compulsory ones.
- Department of Education: HELP indexation and debt reduction. Used for: the completed 20% reduction and the indexation cap.
- ATO: Investing in bank accounts and income bonds. Used for: bank interest as assessable income.
- ASIC Moneysmart: Mortgage offset accounts. Used for: how an offset balance reduces the loan charged interest, and checking the link.
Sources checked 30 September 2026. All dollar figures are hypothetical examples in AUD, and the next indexation rate is an assumption, not a forecast. This guide was prepared with AI assistance and source checking; it has not received professional financial or legal review. It is educational, not tax, credit or investment advice.
