HECS repayment vs high-interest savings: which wins in 2026?

The single comparison that decides whether to pay HECS early in 2026:

HECS indexation (2.80%) vs Savings rate × (1 − your marginal tax rate)

Whichever number is higher is where your dollar earns more. Repaying HECS "earns" you the indexation rate guaranteed and tax-free. Parking in savings earns you interest you pay tax on.

Break-even table

At 2.80% indexation, this is the savings rate (gross) you need at each marginal tax bracket to beat HECS:

• Tax-free threshold (0% MTR + 0% Medicare): 2.80% gross beats indexation. Any savings account works.
• $18,201–$45,000 (18% incl Medicare): Need 3.42% gross to break even. Easy at 2026 rates.
• $45,001–$135,000 (32% incl Medicare): Need 4.12% gross. Most high-interest accounts (5.00%+) clear this.
• $135,001–$190,000 (39% incl Medicare): Need 4.59% gross. 5.00%+ accounts still win.
• $190,001+ (47% incl Medicare): Need 5.28% gross. Borderline. ING and ubank at 5.50% just clear it; lower-rate accounts don't.

Where to actually park the cash

Three accounts consistently pay 5.00%+ in May 2026 with reasonable conditions:

• ING Savings Maximiser — 5.50% on first $100K. Requires $1,000 deposit + 5 settled card purchases + growing balance monthly.
• Macquarie Savings — 5.50% intro for 4 months, then 5.00% ongoing. No deposit conditions. Cap $250K.
• ubank Save — 5.50%. Requires $500/month deposit into linked Spend account.

Rates change. Check the bank's site before opening — the calculator and these tiles get updated monthly but the bank's terms are the source of truth.

The counterintuitive case

Many AU finance commentators default to "always pay HECS early." That advice was correct in 2022–2023 when indexation hit 4–7% and savings rates were 1–2%. It is not correct in 2026. The lower-of-CPI/WPI cap legislated in Nov 2024 fundamentally changed the math.

Don't take generic advice. Run your own numbers.