Six ways to minimise your HECS-HELP debt

With HECS-HELP debts expected to grow more than 4.2% after indexation this year, the pressure is on for current and future university students to avoid racking up unnecessarily high balances.

Students who attend university, or another approved provider, are expected to contribute to the cost of their studies through the Higher Education Contribution Scheme (HECS). How much you pay depends on your area of study, with subjects divided across four bands.

As a guide, a full-time nursing or education student in 2024 can pay a maximum HECS of $4445. At the top end of the scale, law students pay a maximum of $16,323. This is not the total cost of the degree, rather an approximate annual fee based on a full-time study load.

HECS can be paid upfront, or you can choose to make a partial payment and defer the remainder or the full amount by taking out a Higher Education Loan Program (HELP) debt.

HELP is repaid through the tax system. The more you earn, the more you repay each year. In 2023-24, you need to earn over $51,550 before any repayments are required.

HELP debt never goes away - not even if you become bankrupt. And as more of us seek tertiary qualifications, Australia has become awash with HELP debt. Over 3 million people have a HELP debt, with more than $74 billion outstanding.

While HELP debt is interest-free, it comes with two quirks.

What is the 2024 HECS-HELP indexation rate?

First, it is indexed upwards each year in line with inflation. For the 2023 financial year, the indexation rate was a whopping 7.1%, a reflection of multi-decade highs we saw in the cost of living last year.

This year will see the second-highest indexation rate in a decade, with tertiary debts expected to rise between 4.2% and 4.8%.

What is your repayment income?

The other aspect of HELP to watch out for is that annual repayments are based on your "repayment income". This is taxable income with investment losses, reportable fringe benefits, reportable super contributions and exempt foreign employment income all added back in.

So, making, say, a tax-deductible contribution to super may lower your taxable income but it's unlikely to reduce your HELP repayments.

Similarly, asking your employer to pay part of your HECS or HELP debt can work against you. The payment can be treated as a fringe benefit with the potential to bump up your repayment income.

How to keep a lid on HECS debt

In February 2024, Jason Clare, Minister for Education, released the Australian Universities Accord Final Report.

It suggests possible reforms to the higher education system including indexing HELP loans to whatever is lower out of the consumer price index and wage price index.

However, any changes resulting from this report could take years to be implemented.

In the meantime, there are steps students can take to minimise - and manage - HELP debt.

1. Think carefully about where you study

While maximum limits apply, HECS fees vary between universities. For example, in 2024 a first-year Bachelor of Arts (BA) student attending the University of Sydney can be looking at a cost of about $16,323.

At Charles Sturt University in regional NSW, the same student could pay around $13,960.

2. Exit subjects before census date

If you plan to quit a course or subject, do so before census date.

That's typically the last day you can withdraw from a subject before HECS applies.

3. Pay as you go

When you graduate, let your employer know you have a HECS-HELP loan.

The boss is required to deduct extra tax from your regular pay, which helps to gradually reduce your debt rather than leaving you lumbered with a big amount each tax time.

4. Avoid failing subjects

If you fail a subject and have to repeat, you'll pay a second lot of HECS.

If you're struggling, speak to tutors, your course co-ordinator and student advisers. It's not just about HELP debt. Failed subjects are listed on your academic transcript.

5. Know your HECS-HELP limit

There is an upper limit to the HELP debt students can accumulate.

For most students starting in 2024, the maximum is $121,844. A higher limit of $174,998 applies to studies in medicine, dentistry, veterinary science and eligible aviation courses.

6. Stay engaged with your HELP debt

Keep track of your HELP debt to ensure you stay within your HELP loan limit and check repayments are being accurately recorded. Head to myHELPbalance.gov.au to review your balance.

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