HECS-HELP debt is the collective term for all the educational loans in Australia, which includes:
- HECS-HELP
- FEE-HELP
- VET FEE-HELP
- OS-HELP
- SA-HELP
- VET Student Loans
Students regularly use these interest-free loans where the Australian Government pays the course fees for their education with a higher education provider.
Once you finish studying, get your degree and start working, you will pass the minimum repayment threshold and will need to start paying back the HECS-HELP loan.
You can leave the amount to be calculated through your income tax assessment once a year based on your loan limit, but if you want to get ahead and remove that debt from your ledger, there are ways to pay off your student loan early.
In this guide, we’ll provide some basic information on HECS-HELP debt, repayment income levels and voluntary repayment options you can use to clear your debt after completing a higher education loan.
Who can pay HECS-HELP?
To be eligible for HECS-HELP you must:
- Be enrolled in a Commonwealth-supported place
- Be an Australian citizen, a New Zealand Special Category Visa holder who meets the long-term residency criteria or a permanent humanitarian visa holder
- Be enrolled in all your university’s units by the census date
- Meet the specific residency requirements for HECS-HELP
- Submit a completed Commonwealth support and HECS-HELP form to your university by the census date or an earlier administrative date if applicable.
When do I need to start paying HECS Debt?
Your HECS (or HELP) debt repayment is linked to your income.
Once you reach a certain income threshold, you must start repaying your HELP debt. For the 2024–25 year, the minimum Repayment Income (RI) threshold to start making loan repayments has been set by the Australian Tax Office (ATO) at $54,435, up from $51,550 in 2023–24.
When your income exceeds this threshold, a compulsory repayment starting from 1% of your income will be added to your income tax assessment. Without taking the time to review your tax return you might just see it as extra tax withheld.
The ATO has this information, so you don’t need to worry about tracking or calculating anything. Just let your employer know you have a HELP debt.
Why pay off accumulated HELP debt faster?
Avoid Indexation
Your HECS-HELP debt doesn’t accumulate interest monthly like credit cards or personal loans, but due to indexation, the balance will still grow annually.
For 2024, the indexation rate applied on June 1 was 4.0%, lower than the previous year’s 7.1%. But even at this reduced rate, indexation can add up over time. For example, at 4.0%, a debt of $50,000 would increase by $2,000 per annum if left unpaid.
Financial Freedom
Paying off your HECS debt sooner will give you financial freedom. You can stop the continuous repayments and free up funds for other financial goals like saving for a house or starting a business.
Upcoming Debt Reduction
On November 3, 2024, the Australian Government announced a 20% reduction on all HELP debts. This reduction will be applied automatically before June 1, 2025. For example, if you have $50,000 in debt before this change is implemented, it will be reduced by $10,000.
Improve Credit Score
Paying off your HECS debt early shows you’re a good manager of your finances, which will positively impact your credit score. A good credit score is good when applying for credit or loans.
How to pay off HECS-HELP debt faster
You don’t have to make paying off your HECS debt hard. To make it easier, let’s break it down into some simple strategies to clear your student debt.
Remember, the key is to create a repayment plan that suits your financial situation and future plans and stick to it.
Increase your voluntary repayments
Increasing your voluntary repayments is the easiest way to pay off your HECS debt. These are on top of your compulsory repayments and are non-refundable. Managing your budget well is key – you don’t want an aggressive repayment plan to compromise your everyday expenses and commitments.
Think of it as contributing more to your savings account each month. Over time, even small increases can add up big.
Make a conscious effort to either increase your income or cut down on some non-essential expenses and redirect those funds towards your HECS debt. You need to balance living comfortably and paying off your debt.
Reduce your taxable income to free up more funds for voluntary payments
Reducing your taxable income might sound crazy, but it can create extra capacity for voluntary repayments. Once you lodge your tax file number declaration form with your employer, they will withhold extra tax payments towards HELP repayments.
If you have other income – such as business income or investment profits – reducing your taxable income through legitimate deductions can free up funds for voluntary payments. Seek advice from a tax agent before making big changes.
Key Takeaways
- HECS debt repayment starts when your income exceeds $54,435 in 2024-25.
- A 20% reduction in HELP debts will be applied before June 1, 2025.
- Creating and sticking to a plan like voluntary payments will get you financial freedom faster.
- The indexation rate is now 4.0%, but debts will still grow if not paid.
- From July 1, 2025 (2025-26 financial year), only income above $67,000 will be subject to HELP repayments under new rules.
Frequently Asked Questions
Can I pay off my child’s HECS debt?
Yes, you can make voluntary repayments on behalf of your child to help pay off her HECS debt. You can do this by making a direct credit payment to the Australian Taxation Office (ATO) using her account details. Ensuring that all payments are correctly allocated to her HECS-HELP loan balance is important.
Does your HECS debt ever get wiped?
HECS debt is not automatically wiped or forgiven under normal circumstances. However, if you pass away, the remaining HECS debt is cancelled. Additionally, specific government policies or changes could potentially impact HECS debt forgiveness, but these are rare.
How much HECS do I pay on $70,000?
If your annual income is $70,000, you must make a compulsory repayment towards your HECS debt. For the financial year 2024-25, the repayment rate for an income of $70,000 falls within a certain bracket. You can check the Australian Taxation Office (ATO) website for the exact repayment rate applicable to your income level.
What is the best way to pay your HECS debt?
The best way to pay off your HECS debt depends on your circumstances. Making voluntary repayments, increasing your income, reducing expenses, and staying informed about any government reductions or incentives can all contribute to paying off your HECS debt faster.
Is it worth paying HECS early?
Paying off HECS debt early can be beneficial as it reduces the impact of indexation, improves your credit rating, and provides financial freedom. However, it’s important to weigh these benefits against other financial goals and obligations you may have.
Can I pay a lump sum off my HECS debt?
Yes, you can make a lump sum payment towards your HECS debt anytime. This can be done through the Australian Taxation Office (ATO) and may help reduce the overall balance and the impact of indexation.
Is there a discount for paying HECS in full?
Currently, there is no discount for paying off your HECS debt in full. However, making voluntary repayments can help reduce the balance faster and minimise the impact of indexation.
What is the best way to pay off HECS?
The best way to pay off HECS debt is to create a structured repayment plan that suits your financial situation. Consider making voluntary repayments, reducing unnecessary expenses, and staying informed about any changes in government policies or repayment thresholds.
Can I pay my HECS off early?
Yes, you can pay off your HECS debt early by making voluntary repayments. This can be done at any time and helps reduce the overall loan balance and the effect of annual indexation.
How do I pay off my HECS debt in full online?
To pay off your HECS debt in full online, you can use the Australian Taxation Office (ATO) online services. Log in to your account, navigate to the ‘Manage my debt’ section, and follow the instructions to make a full payment using direct credit or other available payment methods.