This is Part 1 of 2 on HELP-HECS
Part 2 is about:
1. Whether you SHOULD repay your HELP-HECS loan, and
2. The best ways to reduce your HELP-HECS loan
I have also created a HELP calculator, to work out how long it will take to repay your debt. Email me at email@example.com if you are interested.
How HELP-HECS works
A bit of information about university fees:
So you get a good ATAR in your HSC and you are off to uni.
If you have made it into a course, you will have usually got into a Commonwealth Supported Place. Most students are in these places. The government actually pays for part of your uni degree by offering cheaper fees (ie. full-fee paying students pay a lot more than Commonwealth Supported students).
The other option is a full-fee paying place. With full fee paying you pay the full amount. Unlike HELP students, you don’t get government subsidised fees or a HELP-HECS loan.
So when you get a job and realise how much is taken out of your salary to pay tax – at least remember that the government has offered you cheaper fees at uni (which the government pays to help fund universities).
A bit of information about HELP:
HELP or Higher Education Loan Programme is where the government pays your uni fees (and then you pay them back). I think it is a pretty good deal – cheap interest and you only have to repay the loan if you earn over a certain amount (more on this below).
So there are 3 options to ensure the uni gets paid for the subjects you are doing:
1. HELP Loan – Defer all the course fees into a HELP loan (Note: you will still have to pay a few hundred dollars in other items like Student Levies to cover sporting/association funding); basically the Government will pay the fees for your uni agree.
2. Pay cash - Pay 100% of your course fees (you get a 10% discount for paying upfront – so instead of $5,000 fees added to HELP debt, you pay $4,500 cash to the uni)
3. Part cash, part HELP Loan – Pay part of the amount (Note: if you pay over $500 you get a 5% discount)
HELP Debt – How does the debt work?
An example of how it usually works:
1st semester comes up – you elect to defer (and get a HELP loan). You have 4 subjects @ $750 – you have a HELP debt of $3,000.
You do this for the 3 or 4 years you are at uni. You then have 3 years x 2 semesters = 6 semesters of $3,000 = $18,000 HELP debt.
The government charge interest on the debt of a few percent (2-3%). This amount is usually added to your balance in May (remember this for the ideas about HECS later).
Your HELP account is administered by the Australian Taxation Office (ATO). You will get a statement from the ATO about once a year – however you can call them to check your balance or work out how much you have to contribute to pay off your debt. Remember that because payments over $500 attract a 5% discount, a payment of $500 reduces your HELP debt by $525.
When do I have to pay the HELP debt back?
When you lodge your tax return over the HELP Repayment Income (see below) a percentage of your taxable income gets added to your tax bill (to repay part of the HELP debt).
For example, after uni you get a job earning $45,000 a year. Based on the table below when you lodge your tax return you are required to pay 4% of your HELP Repayment Income, or about $2,000.
(HELP Repayment Income is similar to taxable income but designed to add back rental property losses + salary sacrificed super + fringe benefits + a few other things so that you can’t buy a negatively geared rental property and add this to your income to avoid paying HELP).
Tune in next week to see whether you SHOULD repay your HELP loan and the best ways to repay your HELP loan