What happens to your HELP (HECS) debt in retirement?

Once, a student debt was something you cleared long before retirement. Not any more. With more people studying later in life — postgraduate courses, mature-age degrees, retraining for a career change in their fifties — a growing number of Australians reach the edge of retirement still carrying a HELP debt (the Higher Education Loan Program, the scheme most of us still call HECS), and wondering what on earth happens to it now. The good news is that a HELP debt behaves nothing like an ordinary loan, and for most retirees the answer is far more relaxed than they fear. Here's how it works. This article is general information only, not personal advice, and because the rules were changed recently, confirm the current details with the ATO.

Is it not a normal debt?

The first thing to understand is that a HELP debt charges no interest. It is, in effect, an interest-free loan from the government. What it *does* do is get indexed once a year, to keep its value in line with rising costs. For a long time that indexation followed the Consumer Price Index (CPI); the law was changed in November 2024 so that it's now the lower of CPI and the Wage Price Index (WPI), and that change was backdated to the 1 June 2023 indexation (ATO, https://www.ato.gov.au/tax-rates-and-codes/study-and-training-support-loans-indexation-rates), which generally makes the annual increase smaller. On top of that, the government legislated a one-off 20% reduction of HELP balances, applied before the 2025 indexation (StudyAssist, https://www.studyassist.gov.au/news/legislation-introduced-reduce-help-debt-20-and-change-help-debt-repayment-rates). So your balance is indexed a little each year, but there's no interest piling on top — a crucial difference from almost every other debt you'll ever have.

Is repayment income-tested — so most retirees pay nothing?

The second key feature: you only make compulsory repayments when your income is above a threshold for the year, and those repayments are collected automatically through the tax system. For the 2026-27 income year that threshold is $69,528, and a new marginal system now applies — your compulsory repayment is worked out only on the income *above* $69,528, not on your whole income (ATO, https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans). While you're working and earning above the threshold, that repayment comes out through your pay and tax return.

But here's what matters in retirement: if your income drops below that threshold — as it does for most people living mainly on the Age Pension and/or a tax-free super pension — you generally make no compulsory repayments at all. The debt simply sits there, quietly indexed each year, without you having to pay a cent towards it. For a retiree on a modest income, a HELP debt is often a non-event.

Is the big one that it's written off when you die?

And then there's the feature that surprises — and reassures — people most. If you die with a HELP debt still outstanding, the remaining balance is cancelled. The debt is tied to you through your tax file number, so it is not recovered from your estate and your family does not inherit it (StudyAssist, https://www.studyassist.gov.au/managing-and-repaying-your-loan/loan-repayments). A compulsory repayment relating to the income year in which you die may still be worked out through your final tax return, but the debt itself does not live on. So the worry some people carry — that an unpaid study debt will eat into what they leave behind, or land on their children — is, on the current rules, unfounded.

So, should you voluntarily repay it?

Put those three features together — interest-free (only indexed), not compulsorily repayable on a low retirement income, and written off on death — and a natural question follows: is it even worth paying off voluntarily? For a lot of retirees, the honest answer is probably not. Money used to clear a cheap debt that you're not required to repay, and that will be wiped out anyway, is often money better kept, or invested to work for you.

That said, it's a genuine "it depends," and worth thinking through rather than assuming. If indexation is running high in a given year and your spare cash is sitting somewhere earning less than the indexation rate, then a voluntary repayment can make sense on the pure numbers. And some people simply prefer the peace of mind of clearing the slate, which is a perfectly valid reason too. So weigh the current indexation rate against what your money is earning elsewhere, factor in how much the tidiness matters to you, and — if it's a large sum — get personal advice before you decide.

What else should you keep in mind?

Two smaller points round it out. A HELP debt is a liability, not something counted as an asset in the Age Pension assets test, and it isn't income — so it doesn't directly reduce your pension. And you can see your current balance any time through myGov or the ATO's online services (ATO, https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/view-your-study-loan-account-online), which is the place to confirm exactly where you stand, especially after the recent 20% reduction and the change to how repayments are calculated.

What do the worked examples show?

These show the two situations people are usually in — already retired, and still working and weighing a repayment. They are illustrative only, not personal advice.

Consider Norma, 68, who went back to university in her fifties and retired with a HELP debt of about $18,000 still on the books, now living on the Age Pension plus a small tax-free account-based pension — an income comfortably under the $69,528 repayment threshold (ATO, https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans). On these facts the debt is close to a non-event: because her income is below the threshold she makes no compulsory repayments, the balance is only indexed (at the lower of CPI and WPI) rather than charged interest, and whatever remains is cancelled when she dies rather than passing to her children (StudyAssist, https://www.studyassist.gov.au/managing-and-repaying-your-loan/loan-repayments). On these facts it is generally rational for someone in Norma's position to leave the debt alone and keep her savings for living costs, rather than draining them to clear a debt she isn't required to repay.

Now consider David, 63, still working part-time on about $75,000 a year while carrying a $12,000 HELP debt, wondering whether to clear it before he finishes up in a couple of years. On these facts the numbers are more finely balanced: under the marginal system he makes a compulsory repayment only on the roughly $5,472 he earns above the $69,528 threshold, so the debt is coming down slowly through his tax anyway, and once he retires below the threshold that stops (ATO, https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans). On these facts it is generally rational for someone in David's position to compare the current indexation rate with what his spare cash earns elsewhere, and to only make a voluntary repayment if the maths — or the peace of mind — genuinely favours it, seeking advice if the amount is large.

Sources

• Australian Taxation Office — Study and training support loans
• Australian Taxation Office — Study and training loan indexation rates
• Study Assist — Loan repayments
• Study Assist — 20% HELP debt reduction and repayment changes
• Australian Taxation Office — View your study loan account online