Paying off student debt

What is student debt?

If you’re an eligible student, you can access the Higher Education Loan Program (HELP) if you’re at university, or the Vocational Education and Training (VET) student loan program if you’re at TAFE or another vocational training provider. In this article we’ll discuss HELP, which replaced the Higher Education Contribution Scheme (HECS) in 2005.

How student debt works

Under the HELP, the Australian Government pays your course fees directly to the education institution. Once you start working and your income reaches a certain amount, you’re required to pay back the debt.

When does the debt begin?

Your study fees for each subject that you undertake get charged to your overall loan after the census date, which is usually a few weeks after the semester begins. If you’re enrolled in a subject after the census date, you will still get charged for it if you end up withdrawing late or failing the subject.

Who manages HELP?

While student loan programs are set up by the Department of Education and Training, debts and repayments are managed by the Australian Taxation Office (ATO).

Is there any interest charged?

Unlike a personal loan or credit card, there is no interest applied to HELP loans. It’s important to note that the loan is indexed each year according to the Consumer Price Index (CPI). The CPI was 1.80% in 2018-19 and, for reference, it was 2.10% in 2014-15.

Can you make extra repayments?

Yes, voluntary repayments can be made to the ATO at any time, regardless of the income you earn.

When does your balance reduce?

Your HELP debt will be updated each year when your tax return has been processed. Even though your employer withholds additional amounts from your pay each pay period, it only gets added to your debt when you lodge your tax return.

When you begin a new job

Be sure to notify your employer if you have a student debt. This will ensure that you’re not required to pay a lump sum payment when you lodge your tax return.

How much do you need to repay?

A compulsory repayment must be made if you earn above $45,881 in 2019-20. The compulsory repayment ranges from 1 – 10% and is based on your income. For example, if you earn between $45,881 and $52,973, the compulsory repayment is 1%.

If you would like to know more about the student debt repayment thresholds, visit StudyAssist.