Salary Sacrifice Student Loan? Master Debt Control (2026)

As an Australian juggling a student loan, you're likely on the lookout for ways to manage your repayment obligations effectively. Salary sacrificing is a strategy many consider to ease financial burdens, but can it be applied to your student loan repayments? Let's delve into the details to provide you with clarity and actionable insights.

Understanding Salary Sacrificing and Student Loans

Salary sacrificing, also known as salary packaging, allows you to pay for certain expenses with pre-tax income, effectively reducing your taxable income and potentially increasing your take-home pay. Common expenses eligible for salary sacrifice include superannuation contributions, car leases, and electronic devices. However, when it comes to student loans, the rules differ.

In Australia, student loans such as HECS-HELP and FEE-HELP are repaid through the tax system once your income exceeds a certain threshold. Unfortunately, current regulations do not permit salary sacrificing of student loan repayments. This means that your repayments are calculated based on your taxable income, which remains unaffected by salary sacrifice arrangements.

Current Student Loan Repayment Rates and Thresholds

Understanding the repayment structure of your student loan is crucial for effective financial planning. As of 2026, the repayment rates and income thresholds for HECS-HELP and FEE-HELP are as follows:

Repayment rates increase progressively with your income, and it's important to stay informed about these thresholds as they adjust annually with indexation.

Steps to Manage Your Student Loan Effectively

While salary sacrificing isn't an option for student loans, there are several strategies you can employ to manage your student loan repayments effectively:

1. Monitor Your Income: Keep track of your annual income to anticipate changes in your repayment rate. Adjust your budget accordingly to ensure you're prepared for potential increases.
2. Make Voluntary Repayments: Although not tax-deductible, voluntary repayments can help reduce the balance of your loan faster, potentially saving you on future indexation costs.
3. Budget Wisely: Create a comprehensive budget that accounts for your student loan repayments as a fixed expense. This will help you manage your finances more effectively.
4. Explore Refinancing Options: While student loan refinancing isn't common in Australia, it's worth discussing your overall financial situation with a broker from Esteb and Co, who has access to 83+ lenders and may offer other solutions tailored to your needs.

Expert Tips and Considerations

To further support your financial journey, consider these expert tips:

• Stay Informed: Regularly check updates from the ATO regarding student loan repayment thresholds and rates to avoid surprises.
• Understand Interest and Indexation: Even though student loans in Australia are interest-free, they are subject to annual indexation. Keeping your loan balance low through voluntary repayments can mitigate these effects.
• Consider Financial Advice: Engaging with a financial advisor or mortgage broker, like those at Esteb and Co, can provide personalised strategies for managing your student loan in conjunction with other financial commitments.
• Don’t Delay Tax Returns: Ensure timely filing of your tax returns to avoid penalties and ensure your repayments are calculated accurately.

Frequently Asked Questions

1. Can I salary sacrifice my student loan repayments? Unfortunately, no. Student loan repayments are based on your taxable income and cannot be reduced through salary sacrificing.
2. Are there tax benefits for making voluntary student loan repayments? No, voluntary repayments are not tax-deductible but can help reduce your loan balance faster.
3. How is the repayment income threshold determined? The Australian Taxation Office (ATO) sets annual income thresholds and repayment rates based on your taxable income.
4. What happens if I earn below the threshold? If your income is below the minimum threshold, you won't be required to make repayments for that year.
5. Can my employer help with my student loan repayments? Employers cannot directly assist with student loan repayments through salary sacrifice, but they can support your financial literacy and budgeting efforts.
6. What if I move overseas? You are still required to make repayments based on your worldwide income if you move overseas, and you'll need to lodge an overseas travel notification with the ATO.
7. How do voluntary repayments affect my loan? Voluntary repayments reduce your loan balance and may decrease the impact of annual indexation.