Written byHECS (Higher Education Contribution Scheme) is the Australian Government student loan, now called HECS-HELP, that covers university fees and is repaid through the tax system once income passes a threshold.
Also known as: HECS, HECS-HELP, HELP debt, HECS debt, Higher Education Contribution Scheme, student loan
Key points
- No interest and no fixed term: the balance is indexed each June and repaid through the ATO as tax once income passes the threshold.
- A HELP debt never appears on a credit file, but every lender asks about it and counts the repayment in serviceability.
- From the 2025-26 year repayments are calculated only on income above the threshold, which lowers the annual repayment for many graduates.
- In 2025 ASIC and APRA both told lenders to treat HELP repayments as income-contingent rather than like an ordinary loan.
- In 2025 the government cut every HELP balance that existed on 1 June by 20 per cent and lifted the repayment threshold for 2025-26.
How HECS-HELP repayments work
A HECS-HELP loan is recorded against the student's tax file number rather than with a bank. Nothing is repaid while income sits below the repayment threshold, and there is no interest, only indexation applied on 1 June each year, now capped at the lower of the consumer price index and wage growth. Compulsory repayments are worked out by the ATO when a tax return is lodged, using repayment income, which adds back items such as reportable fringe benefits and salary-sacrificed super to taxable income.
Employees who tick the study loan box on a tax file number declaration have extra PAYG withheld each pay. That extra tax is not applied to the loan until the return is assessed, so a graduate can see a large withholding all year and a modest repayment at the end of it. Voluntary repayments can be made at any time through the ATO.
HECS and borrowing power
Lenders cannot see a HELP debt on a credit report, so they ask for it on the application and check the payslip or the ATO statement in myGov. The compulsory repayment is then treated as a fixed outgoing in the serviceability calculation, which reduces the amount a borrower can service. The effect is larger on a home loan than on a car or personal loan, but it is counted everywhere.
That treatment softened in 2025. ASIC updated its responsible lending guidance in March to make clear that HELP debts differ from other debts because the repayment depends on income. In June APRA let banks disregard a HELP debt expected to be cleared within a year when assessing a home loan, and from September it dropped HELP debt from the debt-to-income ratio banks report. Lenders still apply their own policies, so two lenders can reach different figures for the same graduate.
HECS, HELP and other study loans
HECS was the original 1989 scheme. Since 2005 it has been one part of the Higher Education Loan Program, and the HECS-HELP label applies only to students in Commonwealth supported places. Full-fee students use FEE-HELP, vocational students may hold a VET Student Loan, and there are smaller loans for student services fees and overseas study. The ATO keeps them in one account, which is why application forms usually ask for a total HELP or HECS-HELP debt rather than a scheme.
The balance is written off on death and there is no penalty for leaving it in place. Whether to pay it down early or keep the cash is a personal decision that turns on the indexation rate, what the money would otherwise do, and whether a loan application is coming up.
Example
A graduate nurse in Orange applies for a car loan two years into her first job. Her HELP debt does not show on the credit report the lender pulls, but the application asks for it and the extra tax on her payslip confirms it. The lender adds her annual compulsory repayment to her living expenses and arrives at a lower maximum loan than she expected. She checks myGov and finds that voluntary payments and the 2025 cut have left less than a year of repayments to run, and sends the lender the statement. Its car loan policy follows the approach APRA set for home loans, so the debt is disregarded and the loan is written at the amount she wanted.
Not to be confused with
- Personal loan
- a personal loan charges interest and has a fixed term, while a HELP debt is indexed and repaid through tax on income
Frequently asked questions
Does HECS affect my credit score?
No. HELP debts are not reported to credit reporting bodies, so they do not appear on a credit report or feed into a credit score. They still affect borrowing because lenders ask about them on every application and count the compulsory repayment as an ongoing expense.
Is HECS the same as HELP?
HECS-HELP is one loan within the Higher Education Loan Program, the one for Commonwealth supported university places. FEE-HELP, VET Student Loans and the smaller study loans sit alongside it. Most people, and most lenders, use HECS and HELP interchangeably to mean the whole balance the ATO holds.
Do lenders count HECS debt on a car loan application?
Yes. The lender asks for the balance and includes the compulsory repayment in the serviceability calculation, though the impact on a car loan is usually smaller than on a home loan. A graduate whose income sits below the repayment threshold has no current repayment to count.
Does paying off HECS before a loan application help?
It can. Clearing the debt removes the repayment from the lender's assessment, and since 2025 lenders have been able to disregard a balance that will be repaid within a year. Because a HELP debt carries indexation rather than interest, using savings to clear it early is not automatically the better choice.
When do HECS repayments start?
When repayment income for a financial year exceeds the threshold set for that year. From the 2025-26 income year the compulsory repayment is calculated only on the portion of income above the threshold, and the ATO works it out when the tax return is assessed, crediting any extra tax the employer withheld.
Related terms
Serviceability
Serviceability is a lender's test of whether you can afford the repayments on a loan from your income, after living costs, existing debts and a rate buffer.
Read definitionCredit file
A credit file is the record a credit reporting body holds about you: your identity details, credit applications, accounts, repayment history and any defaults or court judgments.
Read definitionATO
The ATO is the Australian Taxation Office, the national tax authority that collects income tax, GST and PAYG, administers superannuation rules, issues rulings and enforces compliance.
Read definitionPAYG
PAYG means pay as you go: the ATO system for collecting income tax during the year, withheld from wages by an employer or paid in instalments by a business.
Read definitionHome loan
A home loan is a secured loan used to buy property or fund major home projects, with the lender taking a mortgage over the property as security.
Read definitionAPRA
APRA is the Australian Prudential Regulation Authority, the statutory regulator responsible for prudential regulation of banks, credit unions, insurers and superannuation funds, protecting depositors, policyholders and fund members.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.