For a lot of students, HECS stands for ‘I’ll deal with it later’. It’s one of the best debts you’ll accumulate in your life, with no interest applied and repayments dependent on your income. The convenience of HECS means that loads of us never really give it any thought and just sign away our uni fees to this loan, considering it to be an intrinsic part of our tertiary education experience. But for somebody nearing the end of their degree and starting to earn some serious money, or for the more vigilant student weighing up their post-school options, it pays to get a better grasp on HECS. A slew of acronyms, changing thresholds, rules of repayment- it can all get pretty confusing. We break it down for you.
What is HECS?
HECS-HELP is one of five loan schemes that comprise the Higher Education Loan Program (HELP). This specific loan is for eligible students that hold a Commonwealth Supported Place (CSP) to help pay their student contributions. A CSP is a subsidised enrolment for domestic students where the Australian government pays for part of the student’s university fees; the remaining fees are paid by the student as student contributions. Basically, it’s an interest free loan that let’s you get a degree without having to fork out all the cash up front.
There are a few other eligibility criteria necessary for a HECS-HELP loan beyond holding a CSP, and they can be found here. To apply for this loan you must provide your Tax File Number and submit a completed Request for Commonwealth support and HECS-HELP form before the census date. This form is only available from your university or provider.
There are four other loans that can contribute to a HELP debt. FEE-HELP is for fee paying students (i.e. not on a CSP) and helps them pay their tuition fees. The SA-HELP loan is to assist eligible students pay their student services and amenities fees. An OS-HELP loan is for eligible Commonwealth students undertaking some study overseas. Finally, VET Student Loans helps eligible students in some higher vocational education and training (VET) pay their tuition fees. Your HELP debt may consist of more than one HELP loan.
There is no interest applied to your HELP debt, though it is adjusted to the changing cost of living (so you will see the number you owe grow each year). This is based on the Consumer Price Index (CPI) and this year it was 1.9%.
Paying it off
You only have to pay off your accumulated HELP debt after you start earning a certain amount and repayments are a percentage based on your income. This year the lowest threshold has been decreased to $42,000, and you need to pay 1% of your income at this point. This rate increases by 0.5% for every 6% increase in salary. More information can be found here.
Compulsory repayments are taken automatically each year when you lodge your tax return (if you’ve earned more than the minimum threshold). It’s important to tell your employer if you have a HELP debt as they can make deductions each pay period. This is done by completing a tax file number declaration form. You can also make voluntary payments to pay off your debt quicker. Check out the ATO site for information on how to this.
If you’ve accrued any other debts, such as a credit card or phone bill, it’s a good idea to pay these off first. Most, if not all, financial debts you experience will involve interest rates that will compound the amount owed quicker than inflation does for your HELP debt. If you’re debt-free and have some spare money available, then by all means make some voluntary repayments as they will help out in the long run. But if you’re ever going to have a debt that just sort of hides in the background of your mind for a few years, then this is the one.