Understanding Student Loans System in Australia

Universities and other facilities offer a myriad of different student loans and means in which to pay for higher education. As higher education becomes ever more important in opening up job opportunities, developing an understanding of the way these loans work is a great way to develop confidence in your studies.

Different Types of Student Loans

HECS and HELP are loan programs which provide eligible students with an opportunity to defer the costs of their studies until they start to work. HELP covers costs for general higher education, such as TAFE, Universities or colleges, while HECS loans are specifically for students at public universities and certain private higher education institutions.

HECS and HELP loans are provided for students in ‘Commonwealth Supported Places’, or CSPs. This is where the government pays for part of the total undergraduate course fee, while you pay the rest through these HECS loans. Only certain providers offer CSPs for postgraduate students.

FEE-HELP is another form of commonwealth assistance, but instead of being available for CSPs, it supports students who enroll in courses or institutions where government funding is not provided and the university covers the full cost of the course.

VET loans are offered to cover the fees of vocational and training courses, such as diplomas.

For most students, the loan limit is $113,028. These loans are only available to Australian citizens. You can check your HELP Balance here. You can also see it on the bottom of your Notice of Assessment after the finalization of your tax return.

How Do I Pay?

There are two ways to pay off your student loans.

Compulsory Repayments

You start repaying once your repayment income passes the threshold: $67,000 for 2025-26, the return being lodged now, and $69,528 for 2026-27.

How it is worked out changed on 1 July 2025. Repayments used to be a flat percentage of your whole repayment income, so crossing a threshold by a dollar could cost you hundreds. Since the 2025-26 year it is marginal – the rate applies only to the income above the threshold.

For 2025-26:

• up to $67,000 – nothing
• $67,001 to $125,000 – 15c for every dollar over $67,000
• $125,001 to $179,285 – $8,700 plus 17c for every dollar over $125,000
• $179,286 and over – 10% of your total repayment income

For 2026-27 the same shape applies from $69,528, with the second band starting at $129,718 and the flat 10% from $186,051.

Repayment income is more than your salary: it is taxable income plus reportable fringe benefits, reportable super contributions, net investment losses and exempt foreign income. People are caught out by that more often than by the threshold itself.

You must tell your employer that you have a HELP debt. They will then use the Pay-As-You-Go (PAYG) system to withhold appropriate amounts from your pay. If your employer is not withholding these amounts from your pay, can complete a ‘withholding declaration’ online to tell your employer to start doing so through your MyGov account. When you complete your tax return, the ATO will determine the size of your compulsory payments. Note that these compulsory payments only appear once your tax return has been finalized.

Voluntary Repayments

You can also choose to voluntarily repay your HECS, which is most commonly done through Bpay or credit card. If you plan on making big contributions towards your debt, it is best to do so before lodging your return to avoid the debt from appearing on your Notice of Assessment, triggering more compulsory payments. There is no upfront or voluntary repayment discount. The 10% upfront discount was abolished on 1 January 2017, briefly reinstated, and abolished again from 1 January 2023; the 5% voluntary repayment bonus has not existed since 2017. If you have read otherwise, the page was out of date. (The one-off 20% reduction applied to HELP balances in June 2025 was a write-down of existing debt, not a discount for paying early.)

Both compulsory and voluntary repayments renew your available HELP balance starting from the 2020 financial year, allowing you to study more later in life.

Salary Packaging Agreements

Salary packaging agreements can also be made by your employer, allowing you to make routine voluntary contributions as well as your compulsory payment. Consistent contributions will only appear on your debt once you have done your tax return. Voluntary repayments are not tax deductible. However, if an employer is making voluntary payments on your behalf, they may be entitled to a tax deduction. Note that this can have fringe benefit tax implications.

Get professional support with your student loan in Australia

At Business Tax & Money House, we can help you understand the tax implications of HELP loans and in making voluntary contributions. Book your appointment today.