HECS grows 2.8% a year, interest free. See when paying early helps, when it does not, and where side income fits.
This in-depth guide covers everything you need to know about hecs debt: should you pay it off early in 2026?. Based on verified income data and real-world case studies from our database of 138 side hustle tactics.
For most people under 35, no. As of October 2026 a HECS-HELP debt charges no interest: it grows by indexation, which was 2.8% on 1 June 2026, and you only repay 15c of each dollar you earn above A$69,528 in 2026-27. Clear credit cards and buy now pay later first and build an emergency fund, then pay extra only if you are close to clearing it before a home loan application or the balance would otherwise drag on for decades.
Maybe it lands like this. Your first proper payslip arrives, and the number is smaller than the offer letter promised. Rent takes almost half. Then you open the ATO app and the HECS balance sits there, bigger than the day you graduated, and you start doing sums at midnight about how many years you will be carrying it. It can feel like your generation was handed the bill for the degree the job ad demanded.
That feeling is real. The numbers are kinder than they look. HECS is one of the cheapest debts you will ever carry, the government cut every balance by 20% in 2025, and the repayment rules changed in your favour from July 2025. The decision that matters is where your next spare A$100 does the most good. Sometimes that is your HECS. Often it is somewhere else.
Here is how to decide, with the rules as of October 2026 and the maths shown.
How a HECS-HELP debt grows
There is no interest rate on HECS-HELP. Instead, the ATO applies indexation on 1 June each year to the part of your debt that has been unpaid for more than 11 months. Indexation follows the cost of living, so in today's money the debt holds its value rather than growing like a credit card.
Since 2023 the rate has been set at the lower of the Consumer Price Index or the Wage Price Index. That change was backdated: the 7.1% applied in June 2023 was cut to 3.2%, and 2024's 4.7% became 4%, with the ATO crediting the difference to your account. The ATO's indexation table shows 3.2% for 2025 and 2.8% for 2026.
On a A$30,000 balance, 2.8% adds A$840 in a year. That is the full cost of carrying it for twelve months.
Two rules work in your favour. You make no compulsory repayment while your income sits below the threshold, and if you die, the ATO collects any compulsory repayment for that year and the rest of the debt is cancelled. It does not pass to your family.
What the 20% cut did to your balance
The Universities Accord (Cutting Student Debt by 20 per cent) Bill passed Parliament in July 2025. The Department of Education says the one-off cut removed over A$16 billion in student debt for more than 3 million people, and that around 70% of people repaying a HELP debt are 35 or younger.
It applied to every study and training loan that existed on 1 June 2025, and the ATO says it has finished processing all of the reductions. If the cut pushed your account into credit, the ATO refunded it where you had no other tax or Commonwealth debts.
Log in to the ATO app or ATO online services through myGov and check that your balance shows the reduction.
Compulsory repayments from 2025-26: the marginal system
From the 2025-26 income year, compulsory repayments are worked out only on the slice of income above the threshold, according to the ATO's repayment rates page:
| Repayment income | 2025-26 | 2026-27 |
|---|
| Nil repayment up to | A$67,000 | A$69,528 |
| 15c per dollar above the threshold, up to | A$125,000 | A$129,717 |
| Then a base amount plus 17c per dollar, up to | A$179,285 | A$186,050 |
| Above that | 10% of total repayment income | 10% of total repayment income |
On A$80,000 of repayment income in 2026-27, you repay 15% of A$10,472, which is A$1,570.80 for the year. The ATO's own example has a worker on A$80,000 in 2025-26 paying A$1,950 instead of A$2,800, around A$32 more in each fortnightly pay.
Repayment income is more than your salary. It adds reportable fringe benefits, net investment losses and reportable super contributions to your taxable income. The thresholds rise each year in line with average weekly earnings.
Here is the part that surprises people. On A$75,000 in 2026-27, your compulsory repayment is A$820.80. Indexation on a A$30,000 balance adds A$840. Your repayment does not even cover the indexation, so the balance creeps up.
Your side income counts toward HECS
Every dollar you earn on the side lands in your repayment income through your tax return. The ATO says money from apps and platforms, including delivery, task-based work and freelance services, has to be reported. Without an ABN it goes in "Other income". As a sole trader with an ABN it goes in "Business and professional items". Platforms report your earnings to the ATO, which uses that data to check your return.
Your employer only withholds for HECS on the wages it pays you. The ATO warns that if you have income from other sources, that withholding may not cover the full repayment, and you get a bill at tax time. Two fixes are listed: ask your employer to withhold more tax, or register voluntarily for PAYG instalments.
Run the numbers on a A$100 side-income profit if your salary is A$80,000. The 2026-27 resident tax rate on that band is 30c per dollar, plus the 2% Medicare levy, plus 15c in compulsory HECS repayment. About A$47 goes to the ATO, and A$15 of that reduces your HECS automatically. So side income already pays your HECS down faster before you make a single voluntary payment.
If the repayment itself is the problem
You can apply to defer a compulsory repayment if paying it would cause serious hardship, which the ATO defines as being unable to afford food, accommodation, clothing, medical treatment or other necessities. "Other special reasons" such as a natural disaster or a family death also count. The ATO decides within 28 days. A deferral postpones the repayment rather than cancelling it: the amount goes back onto your debt and keeps being indexed, and it usually lasts no more than a year.
If you are not eligible, you can ask the ATO for a payment plan on the tax debt that includes the repayment. The National Debt Helpline suggests doing a budget first, then calling the ATO on 13 72 26 to set one up, and warns that overdue tax usually attracts interest.
Talk to someone before you panic. The National Debt Helpline on 1800 007 007 connects you with a free financial counsellor, weekdays 9:30am to 4:30pm, with live chat until 8pm.
Should you pay HECS off early?
Start with what voluntary repayments do and do not do, from Study Assist and the ATO:
- There is no bonus or discount. Until 1 January 2017 some voluntary repayments earned a 5% credit. A parliamentary committee recorded that the bonus was removed and "that scheme is now finished". A dollar paid early is worth exactly a dollar.
- They do not reduce your compulsory repayment. You still repay 15c per dollar above the threshold every year until the balance is zero, so your take-home pay does not rise until the debt is gone.
- They are not refundable. Money you send cannot come back if your car dies next month.
- They save indexation. A payment received before 1 June is not indexed that year, so you save 2.8% of it at this year's rate.
Paying early tends to make sense when:
- you have no debt costing more than indexation, and a cash buffer of a few months' expenses
- you are within about a year of clearing it and plan to apply for a home loan (more below)
- your income sits just above the threshold, so compulsory repayments barely cover indexation and the debt would otherwise follow you into your forties
It tends not to make sense when you carry credit card or buy now pay later debt, have no emergency fund, or could use the money toward a home deposit you will need soon. Which of those describes you right now?
Pay these first: cards, BNPL and a buffer
A credit card is the clearest comparison. The National Debt Helpline's own worked example uses a card at 18% interest: A$5,000 paid at the minimum costs A$17,181 in total. Against 2.8% indexation, every extra dollar on that card saves you more than six times as much as the same dollar on HECS.
Buy now pay later is now regulated credit. From 10 June 2025, ASIC requires BNPL providers to hold an Australian credit licence under the National Credit Code. The helpline says that when you ask a BNPL lender for hardship, it must acknowledge you within one business day, respond within 21 days, and put your account on hold during the assessment. The site's guide to paying off buy now pay later covers the order to clear them.
Then the buffer. Without savings, the helpline notes, a car repair or a high power bill tends to go onto a credit card or a payday loan. It suggests about 10% of income as a rule of thumb, and even A$10 a week builds A$520 in a year. Your HECS will still be there, quietly indexed at 2.8%, while you build it.
HECS and your home loan borrowing capacity
Banks assess whether you can afford a mortgage after your existing commitments, and your compulsory HECS repayment reduces your take-home pay. In June 2025 APRA, the banking regulator, updated its guidance so lenders have flexibility to leave HECS repayments out of the serviceability test where the borrower will be largely unaffected by them over the mortgage. APRA gave repayment "within 12 months" as an example of a reasonable timeframe. From 30 September 2025, HELP debt was also removed from the debt-to-income figures banks report to APRA.
So if you are a year or less from clearing your HECS and about to apply for a home loan, a lump sum that finishes it can help. If you are ten years away, a few thousand dollars changes little for the bank and a lot for your deposit. Ask a lender or broker how they treat HECS before moving money.
The maths, with a hypothetical A$30,000 balance
A hypothetical example. You owe A$30,000 on 1 July 2026 (the ATO's 2024-25 HELP statistics put the average at about A$27,700 before the 20% cut, so this is a round illustrative figure). Your repayment income is A$80,000. We assume indexation stays at 2.8% every year, your pay and the thresholds both rise 3% a year, compulsory repayments come off when your return is assessed each October, and any voluntary amount is paid monthly.
| Voluntary each month | Debt cleared in about | Indexation added | Total you repay | Indexation avoided |
|---|
| A$0 | 20 years 4 months | A$10,200 | A$40,200 | none |
| A$100 | 12 years 4 months | A$5,400 | A$35,400 | A$4,900 |
| A$200 | 8 years 4 months | A$3,500 | A$33,500 | A$6,800 |
Why it works: in the first year, your A$1,570.80 compulsory repayment only beats indexation by about A$730, so the balance falls slowly. Adding A$1,200 a year more than doubles the speed in year one, and each smaller balance attracts less indexation next June.
Why it is less dramatic than it looks: indexation tracks prices or wages, so much of that A$6,800 is inflation you would have repaid in cheaper future dollars. A$200 a month for eight years locks up about A$20,000 at a return of 2.8%.
The picture changes at lower pay. On A$75,000, the model takes about 37 years to clear the same balance with no voluntary payments, because compulsory repayments only just exceed indexation. A$100 a month brings that to about 17 years. If you are close to the threshold, small voluntary payments matter most.
To test your own figures, the site's debt payoff calculator works in any currency. Enter 2.8% as the rate for a rough guide.
Get the timing of voluntary repayments right
Pay through the ATO using your payment reference number, found in ATO online services. Electronic payments can take up to 4 business days to reach your account, and indexation applies if the money has not arrived by 1 June. This year Study Assist told borrowers to pay by 26 May 2026 to beat indexation. One lump sum in mid-May avoids the same indexation as twelve monthly payments, and you keep access to the money until then.
Paying off the whole balance? Do it before you lodge your tax return, the ATO says, or a compulsory repayment may still appear on your assessment. Then give your employer a new withholding declaration so it stops withholding for HECS.
Side hustles that fit in Australia
Pick work that pays within weeks and costs almost nothing to start. The ranges below are from the site's guides, mostly built on US data, so plan low. On a A$80,000 salary, up to 47c of every extra dollar goes to tax and HECS.
For A$100 to A$200 a month: start this week
Paid user testing costs nothing to start, and the site's guide puts it at $50 to $800 a month with first payments in one to two weeks. Reaching the top needs several platforms and 10 to 15 hours a week, so treat A$100 to A$200 as the honest target. Check each platform's country list before signing up, because availability for Australian testers varies.
Pet sitting and dog boarding suits anyone with a pet-friendly home. The site's guide puts it at $300 to $5,000 a month, startup $0 to $300. Two weekend bookings a month is a realistic first goal.
For A$300 to A$500 a month: use your degree or your bike
Online tutoring uses what you just studied. The guide's range is $1,000 to $10,000 a month, but that top end is full time, so plan for A$300 from three or four hours a week. In NSW, tutors working face to face with under-18s need a Working with Children Check, and so do people providing mentoring or distance education to children online or by phone. Other states run their own checks, so apply in yours before your first student.
Food delivery pays from your first week. The guide puts it at $1,000 to $6,000 a month with $0 to $200 to start. You work as a contractor, so nobody withholds tax, and the ATO says delivery earnings are assessable income however you are engaged. As of September 2026 the ATO's GST registration page lists food delivery and other platform work among situations that need GST registration, so read it before your first shift.
For A$500 a month and up: sell a skill
Upwork and Fiverr suit graduates with a sellable skill such as writing, design or data work. The guide's range is $300 to $8,000 a month and one to three months to profit, and it says total platform take is typically 15% to 20%. The site's platform fees tool shows what is left, and the hourly rate calculator helps you price above what your day job pays. Before any of these, check your employment contract for a clause on secondary employment.
If you want structure, RichTactic Pro has a day-by-day 30-day plan for each side hustle route, message templates and a private group (one payment, 30-day money-back guarantee).
A weekly plan around a full-time job
Week one:
- Monday: check your HECS balance in the ATO app and list every other debt with its rate.
- Wednesday: open one account for side income and one for tax.
- Thursday: sign up for one hustle (user testing if you need cash fastest).
- Saturday: do the first job or first two tests.
Every week after that: six to eight hours of side work, split across two weeknights and one weekend block. Each Sunday, move about half of the week's side profit into the tax account if your income is above the HECS threshold (47c per dollar at A$80,000), and the rest into savings.
Every month: the day after payday, pay your highest-rate debt from the savings account. Once those are gone and the buffer is built, save toward a mid-May HECS lump sum or your deposit.
Every quarter: check the tax account covers what you have earned. Every May: decide whether to send a lump sum to the ATO before indexation.
Set it up so it runs without willpower
Mistakes and scams to avoid
- Hustling while ignoring help you qualify for. If a repayment is causing hardship, apply for a deferral or call 1800 007 007 first.
- Paying anyone to "reduce" your HECS. The cut and indexation credits were applied automatically. If a message claiming to be the ATO worries you, the ATO says do not respond and call 1800 008 540 to check.
- Jobs that ask you to pay first. Scamwatch warns about task-based job scams that pay a little at first, then ask you to "top up" an account with your own money or crypto. Never pay to get a job.
- Borrowing to start a hustle. Every option above starts at $0 to $500.
- Courses that cost more than a year of extra payments.
- Draining your buffer for a voluntary payment. It cannot be refunded.
For every other kind of debt, see pay off debt with a side hustle. US or UK student loans follow different rules, covered in the student loan payoff plan.
Your first step today
- Log in to the ATO app or myGov and write down your HECS balance after the 20% cut.
- Use the ATO's repayment rates to work out your compulsory repayment for 2026-27 and compare it with 2.8% of your balance.
- List every other debt and its rate. If anything costs more than 2.8%, that is where your side income goes first.
- Pick one side hustle from the list above and do the first sign-up tonight.
Is your compulsory repayment bigger than this year's indexation, or smaller?
This is general information, not financial, legal or tax advice. Rules and rates change and your situation may differ, so confirm anything you rely on with the ATO, the official source linked above, or a free financial counsellor on 1800 007 007.