How much is HECS costing your borrowing power?

HECS: the invisible cost

HECS / HELP isn't visible on your payslip the same way income tax is, so most borrowers underestimate its borrowing-capacity impact. Three things make it more strategic than the rule-of-thumb suggests:

1. Repayments are marginal — but the top tier isn't. Since 2025-26 HELP repayments work like income tax: nothing below the threshold ($69,528 for 2026-27), then 15c per $1 up to $129,717 and 17c per $1 up to $186,050 — only on the income above each threshold. Above $186,050 the system switches to 10% of your entire repayment income. On $200k income, that's $20,000/year of HECS repayment regardless of balance size.
2. Lenders impute it. Even though HECS is technically a tax, banks treat it as a fixed obligation in serviceability assessment. The imputed annual repayment reduces your assessable income for serviceability — and at typical 6× DTI, every dollar of HECS payment costs ~$6 of borrowing capacity.
3. It indexes annually. Even at 4% indexation (the post-2024 reform central case), a $50,000 balance grows by $2,000/year. If your annual repayment is also around that level, the balance stays roughly flat — you're treading water.

Should you pay HECS off as a lump sum?

The answer depends on what else the cash could do:

• Versus deposit savings: Generally adding to deposit beats paying off HECS for the same dollar. Deposit dollars are leveraged 4-19× through borrowing; HECS dollars only "earn" the indexation rate avoided (3-4%).
• Versus borrowing-capacity unlock: If HECS is the binding constraint on getting the loan you need at all, paying it down may make sense — but the calculator above tells you exactly how much extra capacity each $1 of paydown unlocks.
• Versus higher-rate debt: If you have credit card or personal loan debt, that's almost always higher priority than HECS — those carry 15-25% rates vs HECS at 4%.

— Richard Esteb · Esteb & Co · ASIC Credit Rep #574071