Should you pay off HECS early?
Updated 2026-10-15 · Australia
Usually only after higher-cost debts are gone and you have an emergency fund. HECS has no interest — it grows only by indexation (2.8% in 2026) — so paying off a 20% credit card, a car loan or adding to a mortgage offset typically saves more. Paying HECS early can make sense if your savings earn less than indexation, or if you're close to buying a home and want the repayment off your take-home pay.
Quick comparison
| Where an extra $1,000 goes | Roughly saves / earns a year |
|---|---|
| Credit card at 20% | $200 |
| Mortgage offset at 6% | $60 |
| High-interest savings at 5% | $50 (before tax) |
| HECS (2026 indexation 2.8%) | $28 |
Illustrative rates only. Check your own.
When paying early can make sense
- Your other debts are cleared and you have an emergency fund.
- Your savings rate after tax is below the indexation rate.
- You're applying for a home loan soon — compulsory HECS repayments reduce take-home pay.
Timing
Indexation is applied on 1 June. A voluntary repayment needs to be credited before then to avoid that year's indexation on it.
Frequently asked questions
Does HECS charge interest?
No. It is indexed once a year instead.
Can I make a voluntary repayment?
Yes, through the ATO. Check the ATO and studyassist.gov.au for current details before paying.
Sources
Last checked 2026-10-15.