For many Aussie students, higher education is a dream that comes packaged with a significant financial burden. We’re undeniably fortunate to have the HECS-HELP loan scheme available to help students manage the costs of tertiary education. However, the details of these loans can be confusing, and although they are interest-free, that doesn’t mean you should head into this kind of debt without researching it first.

It’s crucial to understand the ins and outs of Australian student loans before you take one out. So, whether you want to be the best tax accountant Sydney has ever seen or a sought-after engineer in Melbourne, read on to gain a clearer understanding of the HECS-HELP loan that will get you there. 

1. What is a HECS-HELP loan?

HECS stands for Higher Education Contribution Scheme, while HELP stands for Higher Education Loan Program. The loan program is available to eligible students pursuing an accredited undergraduate or postgraduate course at a Commonwealth-supported educational institution.

If you qualify, the government will cover the cost of your course fees upfront, and you won’t have to worry about paying it back until you start earning above a set threshold. As of the 2022-2023 fiscal year, the threshold is $48,361.

2. Who is eligible for a HECS-HELP loan?

To qualify for a HECS-HELP loan, you must be enrolled in a Commonwealth-supported course. Only Australian citizens, New Zealand citizens, permanent residents, and permanent humanitarian visa holders are eligible, and you must be studying at least part-time. If you’ve accessed a student loan previously, you’ll only qualify if you haven’t yet exceeded your loan limit.

3. How do HECS-HELP repayments work?

The beauty of HECS-HELP loans is that you don’t have to worry about repayments until you’re earning over the threshold mentioned above. Once you exceed this threshold, your repayments will be deducted from your wages automatically. The amount you pay back will depend on how much you’re earning, but the range is 1% – 10%.

If you are self-employed and earning above the threshold, your repayments will be determined when you complete your tax return. So, if you have a student loan, it’s crucial to use a tax calculator and put money aside to cover your repayments. If you want to knock out your debt faster, you can make voluntary repayments at any time.

4. Are there interest rates or Australian student loans?

HECS-HELP loans are interest-free, but they are indexed to track economic changes. In some years, this indexation is below 1% and barely makes a difference. However, in years with higher inflation rates, like 2023, indexation can add significantly to the outstanding balance of a loan. Proposals have been put forward to abolish indexation or at least pause it in high inflation years. However, they haven’t been successful.  

5. Can student debt be forgiven or erased in Australia?

HECS-HELP loans are hard to shake – even bankruptcy won’t free you from it. However, you do have some options if you’re facing tough times. For debt related to courses you completed, you can apply for a loan repayment deferral. If you have student debt from courses you were unable to finish, and you meet the specific criteria, you may be able to have the outstanding amount cancelled. However, there are no guarantees.

HECS-HELP loans can be a valuable tool that helps you manage the cost of your higher education. However, it is crucial to understand how these loans work before you take one out. By going in with your eyes open, you can achieve your educational goals without placing yourself under financial stress.