6 Tips for Minimising Your HECS-HELP Debt

In today’s competitive job market, further study is a prerequisite for many careers. Whether you pursue a bachelor’s degree, post-graduate study, or vocational training at TAFE, a student loan can help you manage the cost of higher education. However, it will also tie you to repayment requirements that are crucial to understand. In this article, we’ll take you through everything you need to know about student loans in Australia, including some helpful tips for minimising your debt.

Australia’s Higher Education Contribution Scheme (HECS) – now known as Higher Education Loan Program (HELP) – is a government initiative that includes numerous low-rate loans offered to students enrolled in Commonwealth-supported places. Differing greatly from the US system, Australia’s student loans are tax-free and payable automatically through the taxation system. While they remove the burden of course fees, these government loans generally don’t cover additional study costs such as accommodation or textbooks.

1. What is HECS-HELP?

HECS-HELP debt is an umbrella term that can include any unpaid HECS-HELP, FEE-HELP, VET FEE-HELP, OS-HELP, SA-HELP and VET Student Loan debts. If you are an eligible student, you can access these interest-free loans and have the Australian Government pay your educational course fees. Once your income reaches a certain threshold, you will be required to repay all or part of the loan.

A HECS-HELP debt starts immediately after the elected census date for any University course you’ve nominated for HELP assistance. This means that, regardless of whether you’re still studying or not, if your earnings exceed the HELP repayment threshold, you will have to make repayments.

Repayment amounts are calculated on what is referred to as your HELP Repayment Income. This includes your taxable income plus other amounts including reportable fringe benefits, salary sacrificed super contributions, net investment losses, and exempt foreign income.

Pro tax tip: Not sure what your taxable income is? Use our tax calculator to quickly and easily work it out.

2. Who is eligible for HECS-HELP?

To qualify for HECS-HELP, you have to meet the following standards:

Study in a Commonwealth-supported place;
Be an Australian citizen, A New Zealand Special Category Visa holder who meets the long-term residency requirements, or a permanent humanitarian visa holder;
Be enrolled in each unit at your university by the census date;
Meet the relevant HECS-HELP residency requirements;
Submit a valid request for Commonwealth support and a HECS-HELP form to your university by the census date (or earlier administrative date).

READ ABOUT TAX RETURN TIPS FOR UNDER 21s

3. How does HECS-HELP repayment work?

The compulsory repayment threshold for the 2022-2023 financial year is $48,361. Below this figure, you don’t have to worry about repayments. Once you surpass it, the more you earn, the higher your repayments will be. However, if you dip below it again in a future financial year, your repayments will stop until you’re earning in excess of it again. If you want to check the repayment rate for your income bracket, visit our HECS guide where we break it down in an easy-to-read table.

When you lodge your tax return, your tax agent will calculate your HECS-HELP repayment income for the year and tell you how much your compulsory repayments will be. Loan rates are calculated using the consumer-price index.

If making your compulsory repayments will cause you serious financial hardship, you can apply to defer your repayments. You can get some leniency. However, the debt will never disappear, even if you declare bankruptcy. A HECS-HELP debt is only ever cancelled upon death.

4. How does a HECS-HELP loan affect my tax obligations?

To comply with the law and ensure your repayments work smoothly, you must inform your employer that you have a HECS-HELP loan. They will need to estimate and factor the debt into your PAYG. You generally do this by marking the appropriate checkbox when you complete your Taxation Declaration Form.

If you plan to live and work overseas and have HECS-HELP or training support loan, you must:

Update your contact details and submit an overseas travel notification within seven days of leaving Australia. This is if you have an intention to (or already) reside overseas for 183 days or more in any 12-month period;

Lodge your worldwide income or non-lodgment advice.

You can report your worldwide income through your Australian registered tax agent or by accessing ATO online services through myGov.

Pro tax tip: If you use an Australian registered tax agent to lodge on your behalf, they can lodge after the usual 31 October deadline.

5. How do I make voluntary repayments?

You can make voluntary repayments at any time to reduce the balance of your debt. Voluntary repayments do not affect or reduce your compulsory repayments or overseas levies. They are also non-refundable and non-tax-deductible. However, they are a great way to bring down your debt and avoid the pain of indexation during high inflation years.

If you plan to pay off your total loan balance with a voluntary repayment, it’s best to make your repayment before you lodge your tax return. Some people use salary packaging arrangements with their employers to pay off their loans faster by making voluntary repayments. However, it’s crucial to note that entering into a salary sacrifice arrangement may result in your payer providing a fringe benefit to you. So you should seek financial advice before entering into this arrangement.

DOWNLOAD THIS ARTICLE: Freedom from Student Debt: 6 Tips for Minimising Your HECS-HELP Debt

6. How can I check my HECS-HELP debt?

If you work with a tax agent, they will have access to your HECS-HELP debt. They can also advise if it’s beneficial to make voluntary repayments to help minimise your debt. If you’d like to check the balance yourself, you can contact the ATO or access it via your myGov account.

7. What are the best tax tips for repaying HECS-HELP debt?

If you’re organised upfront, you can save yourself precious pennies. Keep all work-related receipts and claim deductions for everything you’re entitled to. This can reduce your taxable income and minimise your compulsory annual repayment amount. In doing so, you give yourself greater control over when and how you pay back your debt.

It’s also crucial to understand that just because HECS-HELP debts are interest-free, doesn’t mean your balance can’t grow over the years. HECS-HELP debts are indexed, meaning they are adjusted annually to track with changes in the economy. In 2020, indexation adjusted student loans in Australia by 0.6%. However, in 2023, the indexation rate was 7.1%. With this in mind, it’s a good idea to consult an accountant to confirm whether compulsory payments will be a wise strategy given your unique financial circumstances.

ITP’s tax accountants were all students once too. We have the expertise and personal experience to help you make informed decisions about your HECS-HELP loan. If your tax return is a little more complicated or you’re unsure about what you can and can’t claim, this is our area of speciality too. Make an appointment with one of our tax consultants today, and we’ll work out exactly what you need to do to minimise your tax obligations and maximise your refund.

As Australia’s Income Tax Professionals, ITP has over 240 offices spread all across the country. Phone 1800 367 487 or use our branch locator to find the office closest to you and book an appointment online. If an in-person appointment doesn’t work for you, we also offer remote tax services. Simply give us a call or book online, and one of our consultants will contact you.