Six ways to avoid racking up a huge HECS-HELP debt

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 student in 2023 can pay a maximum HECS of $4124. At the top end of the scale, law students pay a maximum of $15,142. 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 2022-23, you need to earn over $48,361 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. More than 3 million people have a HELP debt, with a total of $74.4 billion outstanding.

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

First, it is indexed upwards each year in line with inflation. For the 2022-23 financial year, the indexation rate is 3.9%, the highest in at least a decade. Unless your annual repayments outstrip the indexation rate, HELP debt can continue to grow year after year.

The other aspect of HELP to watch out for is that annual repayments are based on your "repayment income" (RI). 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.

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 2023 a first-year Bachelor of Arts (BA) student attending the University of Sydney can pay HECS of about $15,142.

At Charles Sturt University in regional NSW, the same student could pay around $12,900.

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 2023, the maximum is $113,028. A higher limit of $162,336 applies to medicine, dentistry and veterinary science 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 check your balance.

It's not for everyone, but in late 2022, a new scheme kicked in that sees doctors and nurses who live and work in regional and remote areas of Australia eligible to have 100% of their HECS debt eliminated.

Get stories like this in our newsletters.