How is HECS Indexation Calculated – A Comprehensive Details

Many students feel like their contributions to HECS-HELP student debt hardly make a difference. One year, you pay an amount to make your debt less but the next, it increases. This inconsistency can feel confusing especially since HECS-HELP is an interest-free loan or is it? Unfortunately, schools don’t teach about things like HECS indexation or taxes. 

Let us help you understand why HECS-HELP debts are always on the rise, despite being “interest-free.” HECS indexation is calculated by adjusting your student debt each year to match inflation, based on the Consumer Price Index (CPI). 

No need to panic, we’ll cover everything and explain key terms like CPI (Consumer Price Index) and WPI (Wage Price Index) that often get thrown around. So, let us help you understand how HECS indexation is calculated and why it increases every year.

Every year students enrolling in Commonwealth Supported Places (CSP) can get HECS-HELP loans (HECS and HELP loans are the same). It is a way for university students in Australia to pay their student contributions without paying upfront if they meet specific criteria. 

There is a limit to how much you can borrow. For 2024, the loan limit is $121,844 for most students. For students in certain fields, the limit is higher at $174,998. You can’t keep borrowing once you’ve reached your limit, so you need to plan your studies accordingly. 

Luckily, repaying your HECS-HELP debt starts once your income reaches a certain level.  For the 2023-24 year, if you earn $51,550 or more, you must start repaying your loan. For the 2024-25 year, this threshold might rise to $54,435. Also, the amount you repay each year depends on your income and ranges from 1% to 10% of your annual earnings.

What students need to know is that the amount they borrow with a HECS-HELP loan will increase over time due to indexation. Indexation means adjusting your debt in line with inflation, similar to how interest works on other loans. That being said, let’s get into what is HECS indexation, whether HECS is interest-free, and how HECS Indexation works.

Indexation means adjusting prices based on economic changes so that the “value” remains consistent over time. For HECS-HELP, indexation adjusts your student debt to keep its value stable. This adjustment is linked to the Consumer Price Index (CPI) or the Wage Price Index (WPI). (More on that later in the calculation process)

Every year on June 1st, your student loan balance is updated to match the CPI. For example, in 2024, the indexation rate is 4.7%(based on CPI), which means if you owed $26,000, your debt would have increased by about $1,222 (4.7% of $26,000), making it $27,222. So, not paying it off means it will keep growing.

HECS-HELP loans are technically “interest-free,” but this can be a bit misleading. Even though there’s no interest charged like a regular loan, your debt still grows each year due to indexation.

How is Indexation Different from Interest

Interest is a fee you pay for borrowing money, typically calculated daily and charged monthly. The rate is set by the lender, such as a bank or private lender, and can vary over time based on the central bank’s rate.

Indexation, on the other hand, is an annual adjustment to your HECS-HELP debt. It’s designed to keep the value of your debt in line with inflation. While interest is a direct fee for borrowing, indexation is more about adjusting your debt to reflect the changing value of money over time.

As said above, HECS-HELP indexation means your debt changes in value based on economic factors, specifically the Consumer Price Index (CPI) or the Wage Price Index (WPI). But how do calculate the indexation factor? For that, you need to understand the key terms:

Indexation is calculated according to the following process.

Using this method, in the long-term, the Australian inflation rate is projected to trend around 2.60% in 2025 and 2.20% in 2026, according to the above econometric models.

Year	Indexation Rate
2025 (Estimated)	2.60% (Estimated)
2024	4.7%
2023	7.1%
2022	3.9%
2021	0.6%
2020-2019	1.8%
2018	1.9%
2017-2016	1.5%
2015	2.1%
2014	2.6%
2013	2.0%

Get all details about HECS Indexation Rate from here.

Take a look at these examples and grab a calculator or for precise calculations, use our HECS indexation estimator

Emily completed her undergraduate degree from 2020-2022 and hasn’t made any repayments. Here’s how her debt (30,000) was indexed each year:

Not paying means Emily’s debt increased from $30,000 in 2020 to $35,162 in 2024 due to indexation. Now, according to the threshold, she has to pay a certain percentage (From 1 to 10) of the “$35,162” loan amount.