This month universities across the country will commence classes for the first semester of 2021. New students who are wanting to defer paying their fees can do so by taking advantage of the federal governments HECS-HELP loan scheme.
The HECS-HELP loan scheme is both a loan and a student discount for eligible students who are enrolled to study in Commonwealth-supported institutes. The Australian Government through the scheme will pay the amount of your course fees directly to your university or education institute.
Once the student’s income reaches a certain threshold, you will than proceed to start repaying the loan via the tax system. The minimum threshold for the 2021-21 financial year is an income of $46,620. Students also have the opportunity to pay off their debt faster if they wish to do so. This can be done by making a voluntary repayment amount of their choice regardless of their current income or employment status. A voluntary repayment can be made anytime to the ATO via BPAY or credit card.
A HECS-HELP debt commences immediately after the elected ‘census’ date for any university course a student has nominated to receive HELP assistance for.
Eligibility criteria for HECS-HELP
Students are wishing to defer the payment of their education fees via the HECS-HELP scheme must meet the following criteria,
- Be studying in a Commonwealth supported place;
- Be an Australian citizen; or
- Be a New Zealand Special Category Visa holder who meets the long-term residency requirements; or
- Be a permanent humanitarian visa holder;
- Be enrolled in each unit at your university by the census date; and
- Submit a valid request for Commonwealth support and HECS-HELP form by the census date (or earlier administrative date) to your university.
How to determine how much you have to repay?
The minimum Help Repayment Income (HRI) threshold for 2020-21 is set at $46,620. The threshold changes each year. Once a student reaches this level of income, HECS-HELP repayments take effect via your taxes. The payment is still required to be paid even if you are still studying but earning over $46,620 a year. Once you earn between $46,620 and $53,826 in a financial year you are required to repay 1% of your university fees. A student will pay 2% of their fees if they earn between $53,827 and $57,055 a year.
Here is an outline of how much of a percentage must be paid by students based on their income.
$46,620 to $53,826 = 1%
$53,827 to $57,055 = 2%
$57,056 to $60,479 = 2.5%
$60,480 to $64,108 = 3%
$64,109 to $67,954 = 3.5%
$67,955 to $72,031 = 4%
$76,355 to $80,935 = 5%
$80,936 to $85,792 = 5.5%
$85,793 to $90,939 = 6%
$90,940 to $96,396 = 6.5%
$96,397 to $102,179 = 7%
$102,180 to $108,309 = 7.5%
$108,310 to $114,707 = 8%
$114,708 to $121,698 = 8.5%
$121,699 to $128,999 = 9%
$129,000 to $136,739 = 9.5%
$136,740 and above 10%
What is the repayment income threshold?
A students HECS-HELP repayment income (HRI) is different to your taxable income. Calculate it like this:
- Your taxable income for an income year, plus
- Your total net investment losses, plus
- Any total reportable fringe benefit amounts shown on your PAYG payment summary; plus
- Reportable super contributions; and
- Any exempt foreign employment income from the current income year.
Upon commencing a new job, it is important to inform your employer that you have a HECS-HELP debt. This can be completed by ticking a box on your tax declaration form which you will be required to fill out prior to starting work.
Your employer will also set aside additional tax from each payment to cover your projected HECS-HELP debt based on your annual HRI. It is important to remember that, your employer will also withhold the additional tax based on the income they pay you. Your employer won’t factor in other income sources, previous jobs or investments. If you have any of these kinds of income, you will have to make a top-up payment as soon as you lodge your tax return.
How much interested is added to the HECS-HELP loan
Every year on 1st June indexation is added to any accumulated student loan which has been unpaid for over 11 months. As of March 2021, the current rate of indexation is 1.8% and will change on 1st June 2021. The amount of indexation is fixed to the rate of inflation; therefore, the value of the loan is only increased to align with changes made to the cost of living.
Should I pay off my debt early?
Students are for the most part interest-free besides indexation. It is therefore more appropriate to pay off other debts first such as; credit cards, personal loans, overdrafts and mortgages) as these debts all have much higher amounts of interest attached to them.
Do I still pay if I drop out?
Even if you fail to complete your course, the debt will still exist. Students are still required to repay their debt in accordance with the rules outlined above, unless unforeseen circumstances apply (such as serious illness), in which case a student can apply to have the debt cancelled.
If I move overseas what happens to the debt?
Students are still obliged to pay HECS-HELP debt if they move overseas, assuming the student is earning over the minimum repayment threshold of $46,620.
Before moving overseas, you must update your contact details with the ATO if you are planning to stay overseas for 183 days or more in any 12 months. You must also lodge your worldwide income with the ATO, or non-lodgement advice.
Living outside of Australia for an extended period of time won’t result in the ATO cancelling the debt.
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