The new marginal system explained
Before 1 July 2025, HECS-HELP used a flat-rate-on-total-income system: cross a threshold, pay the bracket rate on EVERY dollar. This created sharp "cliffs" — a $1 raise at the wrong income level could cost hundreds of dollars in higher repayments.
The FY 2025-26 reform fixes this. Repayments now work like income tax: only the portion of your income above the threshold gets taxed at that band's rate. The result is a smooth, predictable repayment curve — and almost every borrower saves money compared to the old system.
FY 2025-26 repayment bands (resident borrowers)
| Repayment income | Repayment formula |
|---|---|
| $0 – $67,000 | $0 |
| $67,001 – $125,000 | 15c per $1 above $67,000 |
| $125,001 – $179,285 | $8,700 + 17c per $1 above $125,000 |
| Above $179,285 | 10% of total income |
The transition point at $179,285 is designed so the marginal formula equals 10% of total — making the switch to flat-rate capping smooth. Above that point, 10% flat is LESS than continuing the 17% marginal rate would be, so the cap effectively reduces repayments for very high earners.
Sources
- Dept of Education — Making HELP and student loan repayments fairer
- ATO — Study and training loan repayment thresholds
Related tools
- Australia Paycheck Calculator — see HECS in your fortnightly take-home
- Australia Income Tax Calculator — full annual estimate
- Salary Sacrifice Calculator — note: doesn't reduce HECS