It may surprise you to learn that more than 2.9 million Australians are currently in debt from HECS-HELP.
This vibrant education loan scheme has improved the standards of education in Australia.
If you are thinking of going to university or you are a university student, having knowledge about how HECS-HELP functions will ease your financial burdens.
In this guide, we look at the qualification requirements, how to apply for the loan, the repayment and indexation policies among others.
What Is HECS-HELP?
HECS-HELP is aimed at Australian citizens and permanent residents who wish to undertake undergraduate study and need assistance with payment of tuition fees.
It really provides two benefits.
- A Student Loan: The government pays tuition for the eligible student directly to the college or university. If the student’s repayment threshold is not reached this loan is interest and repayment free until the annual income reaches the required amount.
- A Students Discount: For Commonwealth supported places (CSP) students do not have to pay the full fees to the university and do not have to take a higher loan compared to full-fee paying students.
HECS-HELP is a statutory scheme under the Higher Education Loan Program (HELP) primarily available to the undergraduate students in Australia. For most postgraduate courses, a different loan like FEE-HELP has to be applied for by the students.
Eligibility Criteria For HECS-HELP
To qualify for HECS-HELP, you must meet specific requirements:
- Residency: Must be an Australian citizen or a New Zealand Special Category Visa holder meeting residency requirements, or must hold a permanent humanitarian visa.
- Study Load: Enrol in a Commonwealth-supported place at an eligible institution and complete enrolment by the census date.
- Documentation: Submit a valid Request for Commonwealth support and HECS-HELP form before or by the census date.
For most postgraduate studies, a separate FEE-HELP loan is available instead.
How Does HECS-HELP Work?
enrolled unit by the census date, directly paying the institution. The student incurs a debt for these payments, called HECS-HELP debt, which will eventually need to be repaid through the tax system.
Repayment Process
Repayment of a HECS-HELP loan starts only when your income exceeds a minimum threshold.
For example:
- For the 2023-2024 financial year, the threshold is set at $51,550.
- For 2024-2025, it increases to $54,435.
Once your annual income surpasses the minimum threshold, compulsory repayment begins, calculated as a percentage of your income. Rates range from 1% to 10%, depending on income levels.
How To Apply For HECS-HELP?
Applying for HECS-HELP is typically straightforward:
- During Enrolment: Select HECS-HELP as a payment option while enrolling in your course.
- Complete eCAF: Submit an electronic Commonwealth Assistance Form (eCAF) provided by your university by the census date.
- Approval: Once approved, the government will pay your course fees on your behalf.
Understanding Your HECS-HELP Debt
Once a HECS-HELP loan is incurred, it remains interest-free but is subject to indexation. This means that while no interest accrues, the debt amount is adjusted annually to account for inflation, typically based on the Consumer Price Index (CPI).
In 2024, the government proposed indexing HECS-HELP by the lower of either CPI or the Wage Price Index (WPI) to reduce the impact of inflation on student debt.
Repayment Income (RI) And HECS-HELP Obligations
HECS-HELP repayments are calculated based on your Repayment Income (RI).
It’s important to understand that RI includes not just your taxable income but also:
- Investment Losses: Any net investment losses.
- Reportable Fringe Benefits: Reported benefits shown on your Income Statement.
- Super Contributions: Any reportable super contributions.
- Exempt Foreign Income: Relevant foreign employment income, if applicable.
When your RI reaches the threshold, your HECS-HELP debt is repaid automatically via the tax system.
Compulsory and Voluntary Repayments
- Compulsory Repayments: Once your RI exceeds the threshold, your employer withholds additional tax to cover HECS-HELP liabilities.
- Voluntary Repayments: You can make extra repayments anytime through the ATO using BPAY or a credit card. Voluntary repayments reduce your loan balance and may save you from larger indexation amounts over time.
How to Check Your HECS-HELP Balance?
To monitor your HECS-HELP balance, there are two options:
- Contact the ATO: By calling 13 28 61 and providing your Tax File Number (TFN), the ATO can confirm your HECS-HELP debt.
- MyGov Account: Link your MyGov account to the ATO to view your HECS-HELP balance online.
HECS-HELP vs. Other Student Loan Programs
For students considering postgraduate studies or courses outside of Commonwealth-supported places, other loan programs like FEE-HELP may be available. FEE-HELP covers full tuition fees and is generally used for postgraduate coursework where HECS-HELP is ineligible.
Important Considerations For HECS-HELP Borrowers
- Indexation Impact: Regularly check your balance and consider voluntary repayments to mitigate the effect of annual indexation.
- Threshold Adjustments: Stay informed about threshold updates, as repayment obligations start when your RI meets the specified limit.
- Multiple Income Sources: If you have more than one income source, ensure your total income aligns with your repayment obligations, as employers only withhold tax for HECS-HELP based on their payments.
Require Expert Help To Understand HECS-HELP?
Understanding your HECS-HELP obligations can feel overwhelming, but you don’t have to face it alone. At KPG Taxation, our team of tax accountants is here to make sense of your student loan and help you manage it effectively.
Whether you’re just starting your repayment journey or looking to reduce your tax impact, our experts provide clear guidance every step of the way. Reach out today and let’s work together to achieve financial peace of mind.
