What is HECS-HELP?
HECS-HELP is a loan system which means that students don’t have to pay their student contribution (i.e. HECS fees) until they start earning a decent income. (If you don’t know what a student contribution is, then read the HECS Fees Explained post.)
Who is eligible for HECS-HELP?
Anyone who holds a commonwealth supported place (CSP) at uni can get a HECS-HELP loan.
(The HECS Fees Explained post tells you more about CSPs.)
How do you apply for a HECS-HELP loan?
It’s pretty straight forward.
When you get into university, as part of the admission process the uni will give you some paperwork to fill out. You’ll need a tax file number – if you don’t have one of those then you can apply for one through the Australian Tax Office here. It’s a good idea to sort this out a couple of months before you are due to start uni.
How much interest do you pay on you HECS-HELP loan?
The short answer is: none!
However, the government does increase all HECS-HELP debts to keep up with inflation.
“Hang on! What does that mean?!?”
Well… inflation is a word to describe the fact that the value of money almost always falls from year to year.
“Sorry! I still don’t know what you’re talking about!”
No problem. Here’s a short lesson on how inflation works:
- In the year 1990, a loaf of bread cost $2.00
- In 2015, a loaf of bread costs $3.50
- The loaves of bread are effectively identical, but it costs more money to purchase it in 2015 – this is basically what is meant by inflation.
- In effect, inflation means the value of the dollar falls over time in real terms – in other words you can buy LESS with a dollar in 2015 than you could in 1990.
- In general, people’s wages also rise over time to compensate for inflation.
- Similarly, the government adjusts the value of your HECS-debt to compensate for inflation, otherwise the value of your HECS-debt would fall in real terms (and eventually the poor government won’t be able to afford any loaves of bread).
- When the government adjusts the value of your HECS debt it’s referred to as “indexation”.
Hopefully that makes sense!
How does the government adjust for inflation?
Inflation is generally measured using a thing called the Consumer Price Index (CPI). Basically, how this works is the government takes a selected group of goods (like groceries) and compares the price from year to year. The percentage increase in the price is used as a measure for inflation.
So… for example, if in 2015/2016, the CPI rises 3%, your HECS-HELP debt will increase by 3% as well.
This does not amount to a real increase. In real terms, the value of your HECS debt stays the same because wages usually rise to keep up with inflation.
When do I have to pay back my HECS-HELP loan?
Short answer is: you don’t have to pay back your HECS-HELP loan until you can afford to. (Yay!)
Currently, you don’t have to pay anything if you earn below $54,126 in a year.
Once your earnings exceed that amount, 4% of your income will go toward repaying your HECS-HELP loan.
In fact, the more you earn, the more you pay back. Have a gander at the below table, which sets out how much you pay, depending on your annually income.
|2015-2016 Repayment income||Repayment rate|
|$54,126 – $60,292||4.0%|
|$60,293 – $66,456||4.5%|
|$66,457 – $69,949||5.0%|
|$69,950 – $75,190||5.5%|
|$75,191 – $81,432||6.0%|
|$81,433 – $85,718||6.5%|
|$85,719 – $94,331||7.0%|
|$94,332 – $100,519||7.5%|
|$100,520 and above||8.0%|
Does a HECS-HELP loan constitute value for money?
In fact, it’s the cheapest loan you will ever have, because it doesn’t cost you anything!
It’s effectively an interest free loan that you never have to pay back until you can afford to. Pretty darn good, if you ask me.