HELP-HECS – how it works and when you have to repay the loan
This is Part 1 of 2 of HELP-HECS
Part 2 (to be posted Monday 8th March 2pm) will be about:
1.Whether you SHOULD repay your HELP-HECS loan and
2. The Best Ways to reduce your HELP-HECS loan
I have also almost finished a HELP calculator (to work out how long it will take to repay your debt) I will be providing a free copy to those who are signed up to my newsletter (Sign up at www.nomoney.com.au/newsletter)
How HELP-HECS Works
- A bit of information about university fees.
So you get a good UAI in your HSC and you are off to Uni.
If you have gotten in to 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 (i.e. full-fee paying 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 cheaper 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 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, 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). So the Government will pay the fees to your Uni.
2. Pay cash - Pay 100% of your course fees (you get a 20% discount for paying upfront – so instead of $5,000 fees added to HELP debt – you can pay $4,000 cash to the Uni)
3. Part Cash, Part HELP Loan – Pay a part of the amount (note if you pay over $500 you get a 20% discount)
HELP Debt – How does the debt work?
So just 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 (note this for the ideas about HECS later).
Your HELP account is administered by the Australian Taxation Office (ATO for short).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 pay to pay off your debt (As payments over $500 attract a 10% discount – e.g. $500 reduces your HELP debt by $550)
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 + and a few other things so that you can’t buy a negatively geared rental property to your income to avoid paying HELP).
Tune in next week to see whether you SHOULD repay your HELP debt and the best ways to repay your HELP loan
Tags: HECS debt, What is a HECS debt, What is HELP