There are now two important dates that you need to consider if you have a HECS/HELP debt.
Since The Higher Education Contribution Scheme (HECS) was introduced for tertiary education in Australia, it has charged an "interest rate" on 1 June each year. A few years ago the Government changed the name of the debt to the Higher Education Loan Program (HELP) but it essentially is the same thing. The rate charged is the Consumer Price Index (CPI) factor, or inflation, for the year. Generally this ranges between 3% to 5%. Makes for a pretty cheap loan compared to the interest rates that the banks charge these days for unsecured personal loans, which can be anything between 8% to 13%.
If you were lucky, like me quite a few years ago, there can be years of negative inflation, that is, deflation, and your HELP debt can be reduced. In my instance I got $10 off my overall debt. Enough to buy a poor student a few jugs of beer back in those days!
Now the smart university students make voluntary repayments of their debt just before 1 June to avoid any "interest" being charged on their debt for the previous year as well as getting a 10% discount on any repayment made over $500. That is, if you debt is $11,000, you only have to pay $10,000 and the last $1,000 would be written off as a discount.
However, in the recent Federal Budget, it was announced that from 1 January 2012 any voluntary repayment of the HELP debt would only attract a 5% discount, rather than the 10% currently enjoyed. Now I reckon the really, really smart students will try and pay off as much of their debt by 31 December otherwise their $10,000 will only get them a $500 discount in the New Year. That extra $500 buys a hell of a lot of jugs of beer. Make sure you invite me to help drink them!
If you can't afford any voluntary payments, don’t think that you will never have to repay your debt (although you may be able to defer whilst living overseas for a while). When you enter the workforce you need to start paying back the government for your education. You should tick the box on your Employment Declaration form to say that you have HELP debt and your employer will start taking out extra tax to meet the compulsory repayment each year.
Here are the HELP repayment thresholds for 2011-12. If you don’t reach the income threshold then you should get a really nice tax refund once you lodge your income tax return.
HELP repayment thresholds and rate (2011–12)
|
HELP repayment income
|
Repayment rate
|
|
Below $47 196
|
Nil
|
|
$47 196-$52 572
|
4%
|
|
$52 573-$57 947
|
4.5%
|
|
$57 948-$60 993
|
5%
|
|
$60 994-$65 563
|
5.5%
|
|
$65 564-$71 006
|
6%
|
|
$71 007-$74 743
|
6.5%
|
|
$74 744-$82 253
|
7%
|
|
$82 254-$87 649
|
7.5%
|
|
$87 650 and above
|
8%
|
If you have a Student Financial Supplement Scheme (SFSS) loan then you need to repay after you lodge your tax return at the following rates:
SFSS repayment thresholds and rates (2011-12)
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Repayment income (RI) thresholds
|
Repayment rate
|
|
Below $47 196
|
Nil
|
|
$47 196-$57 947
|
2%
|
|
$57 948-$82 253
|
3%
|
|
$82 254 and above
|
4%
|