Understanding Your HECS-HELP Debt

What is HECS-HELP?

HECS or HECS-HELP is a program offered by the Australian Government allowing local students to attend university at no upfront cost. Compulsory repayment will begin once you are earning $45,881.

To be eligible for HECS-HELP, you must:

  • Be enrolled in a supported program
  •  Be an Australian citizen who meets the residency requirement
  • or be a New Zealand Special Category Visa (CSV) holder
  • Submit a request for Commonwealth assistance
  • Not have up to the HELP loan limit

How Much Can I Borrow?

The HELP debt limit for 2020 is $106,319 or $152,700 for courses such as medicine, veterinary science or dentistry.

If you have existing debt and you are wondering how to check your HECS debt balance, you can find your details  HERE.

What Does HECS Cost?

Although nothing is free in this world, your HELP loan is the next best thing. Each year your HECS debt is indexed meaning that it increases by the rate of inflation. Indexation is applied to HELP debt to ensure the Government get their money back. Although they don’t make money on the deal, they do get their money back, and you could argue that the increase in skilled labour does lead to higher salaries, increasing future tax dollars.

When Do I Start Repaying HECS?

The HELP repayment threshold or the level of earnings you can achieve before repaying your student loans in 2020 is $45,881. Beyond this amount the following HECS repayment rates will apply:

2019-2020 Repayment thresholdRepayment % rate
Below $45,881Nil
$45,881 – $52,9731.0%
$52,974 – $56,1512.0%
$56,152 – $59,5212.5%
$59,522 – $63,0923.0%
$63,093 – $66,8773.5%
$66,878 – $70,8904.0%
$70,891 – $75,1444.5%
$75,145 – $79,6525.0%
$79,653 – $84,4325.5%
$84,433 – $89,4986.0%
$89,499 – $94,8686.5%
$94,869 – $100,5607.0%
$100,561 – $106,5937.5%
$106,594 – $112,9898.0%
$112,990 – $119,7698.5%
$119,770 – $126,9559.0%
$126,956 – $134,5729.5%
$134,573 and above10.0%

There’s no need to worry about repaying your HECS-HELP debt, your employer will automatically deduct the amount owed from your pay.

Why I MyHECS Debt Not going Down?

Depending on your income or the amount of HECS that you owe you may find that at tax time your HECS debt largely remains the same or even potentially increases. This can occur because the indexed amount is added to your existing debt prior to deduction of the amount your employer has collected on your behalf throughout the year. This means if you owe $50,000 and your employer has put aside $500 of your income to pay down HECS, but indexation adds $500 then your amount owing post-tax is $50,000.

Personally, I’m not a fan of how this works as I believe the amount that is withheld throughout the year should be deducted at the time it is taken, but it is not the end of the world. Inflation means that even if your debt value of $50,000 remains unchanged, its real value has actually decreased and one day $50,000 will be a small amount of money.

Should I make Additional HECS Repayments?

We don’t provide individual advise so I can’t 100% say that you should or shouldn’t make additional HELP repayments, but as a general rule, you should not make extra repayments. The interest charged on HECS debt is effectively nothing, the nominal amount that you owe may increase from $50,000 to $50,500 or stay at $50,000 as in the example above but with inflation rising at the same rate the loan value is exactly the same or lower each year. This means that you are best to delay paying off the loan for as loan as possible.

Kyle Schache
Kyle Schache
Like many, I wasn't as good with money as I should have been in my late teens and early twenties. Now in my late twenties and the holder a bachelor and masters degree both specialising in finance I spend my time optimising my investments and providing general advice to others.
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