25 May Understanding student loan repayments in Australia
Understanding student loan repayments in Australia
Did you apply for HECS-HELP at the beginning of your degree and now three or four years on, you’ve completely forgotten how repayment works?
You’re certainly not alone.
That’s why we’re here to offer you a refresher so you have a better understanding of your student loan repayment.
How does HECS-HELP work in Australia?
In order to apply for the Higher Education Loan Program, you are required to be an Australian citizen, hold a New Zealand special category visa or hold a permanent humanitarian visa.
The Higher Education Loan Program is designed to allow you to study your degree and make student loan repayments once you are earning an amount above the threshold.
Initially, when you begin studying, your tuition fees will be charged to your student debt as soon as you pass the census date for each course you are enrolled in. The census date is usually 2 weeks into the semester but you will be notified of upcoming census dates.
Regardless of whether you complete your course or achieve your qualification, the student debt you accrue must be paid once you’ve passed the census date.
HECS-HELP Debt Repayment Requirements
You will be required to start paying off your HECS-HELP debt once you earn above the compulsory repayment threshold.
You can also make voluntary repayments at any time. This may be worth looking into if you have substantial debt and you are looking to borrow a large sum to purchase an asset like a house.
Currently, the 2019/2020 compulsory repayment threshold is $45,881 which will attract a repayment rate of 1%.
The compulsory repayment threshold will increase to $46,620 as at 2020/2021 financial year with the repayment rate also at 1%.
Only when you reach the threshold will you be required to repay your student loan.
Effects of School Loans
Student loans are different from other personal loans. This is because unlike purchasing a new car, you are not required to pay interest.
Simply put, you don’t have to pay the Government to borrow money to study.
Instead, your student loan is indexed to inflation. Meaning your repayments and the compulsory repayment threshold will rise according to the cost of living.
Paying off HECS-HELP
Paying your student loan is a simple process.
Your student debt is connected to your Tax File Number and this is how the ATO keeps track of your loan amount and loan repayments.
When you start a new job you will need to fill out a Tax Declaration Form. On that form, you will need to answer yes to having a HECS-HELP debt.
Your employer will then withhold additional tax based on the income paid to you. This withheld tax will then be paid to the Australian Tax Office and should appear on your payslips from your employer.
For further HECS help
If you have any questions about HELP/HECS repayment, or you need HECS help, feel free to reach out to our team for expert financial planning advice.