HECS doesn't charge interest — but the balance still moves
The short answer is no: HECS-HELP debts don't attract interest like a credit card or home loan. Instead, the debt is indexed on 1 June each year to keep pace with inflation, so it holds its value in today's dollars.
Indexation applies to the part of your loan unpaid for more than 11 months, so the balance grows a little every June — even while you study.
How indexation is calculated: CPI and WPI, whichever is lower
Indexation is capped at the lower of two official figures: the Consumer Price Index (CPI), which tracks the cost of everyday goods and services, and the Wage Price Index (WPI), which tracks wage growth. This rule became law in August 2025.
Since 2025 it's worked out after the December CPI and WPI releases, using the previous two years of figures.
Indexation rates in recent years
Recent ATO indexation rates applied on 1 June: 2026: 2.8%, 2025: 3.2%, 2024: 4.0% (recalculated from 4.7%), 2023: 3.2% (recalculated from 7.1%), 2022: 3.9%, 2021: 0.6%, 2020: 1.8%, 2019: 1.8%, 2018: 1.9%. The 2024 and 2023 rates were reduced retrospectively, with the difference credited automatically.
The 2025 changes: retrospective fixes and a 20% cut
Legislation that became law on 2 August 2025 recalculated the 2023 and 2024 indexation using the lower of CPI and WPI and locked in the method for future years — hence 2025 at 3.2% and 2026 at 2.8%.
It also delivered a one-off 20% reduction to HELP debts under $200,000, applied automatically — a sizeable chunk off most balances.
What indexation means for you in practice
A 2.8% indexation on a $30,000 debt adds about $840 on 1 June. It compounds — each June it's calculated on the growing balance, and over a decade that adds up. That's why voluntary repayments before 1 June are so effective: they shrink the balance that gets indexed.
Your debt keeps being indexed while you study and while you're below the threshold. The only ways to cut what indexation costs: repay faster, or earn above the threshold so compulsory repayments kick in.
FAQ
Q: Will my HECS debt grow while I'm still studying? A: Yes. Each 1 June, indexation applies to the part of your loan unpaid for more than 11 months, even while you're a student — the 2026 rate was 2.8%.