While there are different types of government-run schemes offering financial assistance to Australian students, most domestic and undergraduate students receive help under the Higher Education Contribution Scheme (HECS).
Designed to act as both a student loan and a student discount, HECS-HELP allows eligible students to study now and pay back what they owe later, once they start earning over a certain amount.
So, if you are an eligible student, the Australian government will pay your course fees for you, through the HECS-HELP scheme. Alternatively, if you pay your course fees upfront ($500 or more), you can use the HECS-HELP scheme to receive a discount.
The loan or discount is paid directly to your educational institution by the Australian government. Then, once your income reaches a certain threshold (currently $55,874 for the 2017-2018 financial year), your loan payments will be made through the tax system, deducted from your salary.
Do you pay interest on a HECS‑HELP loan?
Unlike most other types of loans, HECS debt does not accrue interest. Where you may have to pay a specified rate of interest on consumer loans, such as personal loans, HECS-HELP loans charge no real interest to borrowers.
However, if you have a HECS-HELP loan, your debt will be indexed each year to reflect changes in the Consumer Price Index. In doing this, your HECS debt maintains its real value, no matter how long it takes you to pay it off.
This indexation adjustment is made by the Australian Taxation Office (ATO) on 1 June each year, and applies to the portion of your debt that has been unpaid for 11 months or more.
How do you find out much you owe?
As HECS-HELP debts are managed by the ATO, you can use the myGov website to view your HECS debt and your repayment options. To access this information, you need to create a myGov account linked to the ATO.
Information available online includes:
- Indexation amounts,
- Voluntary and compulsory repayments,
- Overseas levy amounts,
- Any benefits, bonuses and discounts.
Alternatively, you can contact the ATO on 13 28 61 to find out the balance of your HECS debt. To access this information, you will need your tax file number (TFN).
When do you have to repay your HECS debt?
As part of the terms of the HECS-HELP loan, you must start repaying the loan once you reach a certain income threshold. For the 2017-18 tax year, you will only start repaying your debt once you have a taxable income of more than $55,874. As of the tax year 2018-19, that minimum income threshold will decrease to $51,957, and may decrease further if the proposed Coalition bill passes.
The threshold for repaying a HECS debt doesn’t only affect graduates. As long as you are earning over the threshold, you will start repaying the debt, even if you are still studying. If you are living overseas, you will still be expected to repay your HECS debt. While this used to be a loophole, it was closed in 2016.
How is your income calculated with regards to HECS debt? Your repayment income is calculated from the amounts given on your income tax return, including your taxable income, your reportable fringe benefits, your total net investment loss, your reportable super contributions, and any exempt foreign employment income amounts.
How much will your repayments be?
The repayments on your HECS debt are calculated as a percentage of your income. This percentage increases as your income increases, so the more you earn, the higher your repayment will be. You can check your HECS debt repayment amount online through your myGov account, and it will also be included on your income tax notice of assessment.
2017-2018 Repayment Rates
2018-2019 Repayment Rates
Can you pay off your HECS debt sooner?
If you want to make voluntary repayments towards your HECS debt, you can. These voluntary repayments can be made at any time, and can be any amount. They are made in addition to the compulsory repayments made through your tax return. Unfortunately, the 5% voluntary repayment bonus that used to be available, ceased on 1 January 2017.
It’s worth bearing in mind that as HECS debts do not accrue interest, it may better to pay down other debts first, if you have them. Paying down high interest debts like credit cards and certain personal loans may be more beneficial in the long run.
However, if you do choose to make voluntary repayments to your HECS debt, you can do so by BPAY or direct credit, credit card or by posting a cheque to the ATO.
What appens if you can’t afford your HECS debt repayments?
Dealing with debt isn’t easy. If you believe you are suffering serious financial hardship because of your HECS debt repayments – or if there are any other reasons why you think you should not make a compulsory repayment – you can apply to the ATO to defer your repayment.
You can do this completing the Deferring your compulsory HELP, HECS or Financial Supplement repayment form, which is available on the ATO website. Within the form, you will have to provide a detailed statement, specifying your household income and expenditure in order to justify your claim of serious hardship.
It is up to the ATO to determine whether your application is successful. However, if you are unhappy with the decision, you may choose to have it reviewed, as long as this application is made within 28 days of receiving the notice.
Then, after this review, if you still believe the ATO has made the wrong decision, you can apply to the Administrative Appeals Tribunal (AAT) for a follow-up review. You have 28 days from the day you receive the ATO’s review to make this application with the AAT.
What happens to your HECS debt under special circumstances?
Want to know what happens to your HECS debt if you are declared bankrupt? What about when you die?
If you have significant financial problems, it may result in bankruptcy. If you are declared bankrupt, this does not affect your HECS debt. As accumulated HELP debts are not provable under the Bankruptcy Act 1966, you will still have to repay your HECS debt even after you have been declared bankrupt.
When you die, your HECS debt is cancelled. That means, neither your family nor the trustee of your will is required to pay the rest of your accumulated HECS debt.