Congrats, you’ve graduated university – what an achievement! Now real life can begin. But wait, before you start, don’t forget your gigantic, needy pile of uni bills. Yep, it’s HECS debt repayment time! Don’t worry though, they said. You only begin to feel the strain when you start earning the big bucks – oh wait, it’s all changed.
In just a months time the governments long-heralded 2018 Sustainability Bill will come into effect, ushering in a range of new changes for students repaying their HELP loans. From 1st July 2019, uni students earning at least $45,881 will have to begin carrying the weight of their student debt. For those just feeling the brisk shock of rent, bills and general life upkeep, the lowering of the bracket is quite a disturbance. But before you start to kick the tires and light the fires, we are here to set your mind at ease. Surprisingly the world will continue to spin, even after you begin to repay your HECS-HELP debt, so here are the facts, tips and all-round survival guide.
What’s the difference between HECS-HELP and other HELP Loans?
Before we get into it, let’s clear up any misconceptions you may have around HELP Loans. The Australian government offers four loan schemes to students that meet certain needs and financial obligations: OS-HELP, SA-HELP, HECS-HELP, and FEE-HELP. The HECS-HELP loan is the most common of these four because it is available to Australian citizens (and certain visa holders) who are studying in a Commonwealth Supported Place. HECS supports students to pay their course fees with either a loan or a discount for certain up-front payments.
The other HELP Loans offer the following financial assistance to students:
- OS-HELP: a loan that can help students enrolled in Commonwealth supported universities who choose to study their course partially overseas, pay for these overseas study expenses (e.g. student exchange).
- SA-HELP: a loan that can help eligible higher education students pay for their student services and amenities fee.
- FEE-HELP: a loan that can help full-fee paying students pay their tuition fees at university and other higher education providers that are not government subsidised.
1 July 2019 Changes: The Facts
Before the government’s decision to decrease the tax threshold, a student would begin repaying their HECS debt once they earned $55, 874. That means for a lot of uni students HECS debt repayment was a thing for the future.
So, the decrease in the threshold is quite significant.
The decrease may be significant, yet, the new plan only requires students to repay back 1% of their taxable income. So, let’s do the math. If you earn $45,881, then under the new threshold you’ll pay less than $9 a week to your student loans. That may not seem like a lot, but for all those who depend on coffee for productivity, it will cost you approximately 2.5 coffees a week. Or for us who see Netflix as the elixir for life, it will cost you approx. 3 years worth of subscriptions.
Clearly, something’s gotta give. But don’t worry there’s help on hand for managing debt repayments soon.
With the average income for a uni grad coming in at around $52,000 (subject to which career path you’ve chosen), you may not even have to be a grad or working full-time to start repaying your loan. The new threshold also offers very little breathing room to make that challenging transition from uni to actual responsibility. Learning the ropes of rent, bills and unexpected expenses leaves little room for error – and the new threshold simply removes another piece of the Jenga tower. We know these stats may seem daunting, but we can offer some must-read tips for paying off HECS debt.
What is HECS-HELP debt repayment?
Now, if you’ve been completely in the dark so far, let us shed some light on HECS debt repayment. HECS debt repayment is the task of paying off long lost uni debt. It’s a no-interest loan that disappears when you do! So, no need to fret about your future children carrying the load of your HECS debt. In reality, HECS debt repayment is a percentage of your income, that is automatically transferred out of your paycheck. If you want the source of the info, head over to MoneySmart.
Most budding uni grads thought HECS debt would be a thing of the future. That debt you thought about for a fleeting moment, then pushed it to the back of your mind for future you to worry about. Well, for anyone earning over $45,881, it will be rearing its ugly head ready to strike at any moment. We make it sound pretty scary, but don’t worry, we have all the right tips to navigate you through the rough seas.
How to get started with HECS debt repayment
If you’re young and fresh-faced, you may find it daunting having to pay off a hefty loan, but it’s quite easy. You know that tax file form you have to fill out at the beginning of each new job? Well, that’s the ticket to HECS debt repayment. If you have HECS debt, you should tick the option on the tax file form and once you started to earn enough moolah to surpass the HECS debt repayment threshold (not that hard to do now); payments will be automatically deducted from your account. When you achieve that elusive state of freedom from debt, you simply need to fill out another tax file form to stop the deductions.
Tips to help to manage HECS debt repayment
Managing debt is made easier with budgeting. Budgeting is key to managing your money and staying on top of your finances. If you’re affected by the latest change to the HECS debt repayment threshold, then, don’t panic – simply schedule it into your budget. If you’re finding your finances are tight as it is, then you may need to cut down on some luxuries.
Set up a visual reminder of your HECS debt repayment. Instead of dwelling on your missing income, show yourself where it’s going. If you wish to make voluntary repayments, set goals for your HECS debt. It helps to visualise your achievements, so they seem more like reality, rather than a daydream.
Don’t let it scare you.
Don’t be frightened by your HECS debt. Especially, if you’re not used to debt, it can feel uneasy to owe so much. However, start by taking a step back, don’t let it overwhelm you. Remind yourself of the facts; it’s a no-interest loan and the repayments are made automatically. So, there’s really nothing to worry about.
Know how much you owe.
Before imagining the hordes of moolah you have to repay, actually CHECK how much HECS debt repayment you have. No freaking out, please! It may not be as much you think.
How to check how much HECS debt repayment you have?
It may be hard to believe, but accessing your HECS debt is pretty easy. Simply log into your MyGov account, pop over to the ATO and you’ll find a lovely surprise awaiting your attention – your HECS debt! To tackle your HECS debt repayment head on, it’s important to know how big the task is.
Do you want to make voluntary payments?
Unlike, other loans, your HECS debt is 100% interest-free! We thought you deserved some good news. So, monetary wise, there isn’t much advantage to paying off your HECS debt early. Or, that’s what they say. If you make voluntary repayments before your HECS debt gets indexed on the 1st June, you may avoid sneaky add-ons.
Still thinking about making voluntary payments? Here’s why you should:
- You have no other repayments
- Have a couple of bucks lying around looking for a purpose (unlikely, right?)
- You wish to reduce the pressure of your heavy HECS debt
Carrying around debt can be overbearing for some. So, if you are struggling with a $40,000 weight strapped to your back, why not make a voluntary HECS debt repayment.
Perhaps you shouldn’t consider voluntary payments if the following applies to you:
- You have credit card debt or you’re currently repaying a personal loan
- You’re not yet earning enough money to surpass the HECS debt repayment threshold
Basically, if you have any other debt, you should repay it first before HECS. Considering HECS repayments are automatic and carry no interest (apart from the index), you can slowly pay it off without much hindrance to your precious smashed avo on toast funds.
If you’re super keen, how do you make voluntary payments?
With the wonder of online communication, you can make a voluntary HECS debt repayment via BPAY, direct credit, credit card or if you’re yearning for the good old days, you can post a cheque to the ATO.
To lodge a voluntary payment online, you must provide a payment reference number (PRN). If your heart is sinking at the thought of combing through all your files to find this mysterious PRN, then rest assured, you can simply find the number in your MyGov account. You can access the payment details for the ATO via their website.
Moving overseas and wondering about your HECS debt repayment?
Don’t be! Moving overseas doesn’t hinder your HECS payments, however, it also doesn’t save you from the responsibility either. Before you move overseas you must update your contact details and fill out an overseas travel notification if you intend to move overseas for 183 days or more. Once you’re settled and you have an income, you must lodge your worldwide income, and your HECS repayments will be taken from new net income. The HECS debt repayment threshold remains the same.
Can you ever cancel your HECS debt repayment?
The government has a process in place if you ever need to cancel your HECS debt repayment under special circumstances. However, the special circumstances only apply if you don’t finish your unit of study.
You can apply for your HECS debt to be cancelled if you did not complete your unit due to serious illness or other ‘special circumstances’. You cannot apply for HECS debt cancellation if you withdrew from the course after the census date. However, if you are seriously ill and withdrew after the date, you may apply.
The latest reduction of the HECS debt repayment has shed light on the number of women in low-income jobs. Greens Senator, Andrew Bartlett highlighted the impact once the change was announced,
“The lowering of the HECS repayment threshold will be forcing 185,000 additional people to start paying back their fees, and 62% of them are women.”
Women occupy many of Australia’s low-income jobs, such as nursing and admin roles. They will be the first to be hit by the recent decrease in the HECS debt repayment threshold. Just something to ponder.
Don’t worry – there are plenty of other loans coming your way
In recent years, Australian household debt has risen to be one of the highest in the world. Looking at the total owed as a percentage of net income, Australia owes 212%, behind Norway, Netherlands and Denmark. Mortgage debt takes the crown for the highest percentage of household debt. And student debt comes in at 2.1%. So, HECS debt repayment is merely a warm-up for your upcoming debt marathon. But, don’t worry, you’re not alone. In the coming months, we plan to break down debt, the good, the bad and the ugly. You won’t have to fend off debt without our help!
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Published: July 2018
Last Edit: June 2019
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