How long it will take to pay off your HECs debt

HECS debt and education in Australia

The days of the Government paying for students’ university costs have come and gone, and now we have the HECs system available to help would-be academics with their higher education loans.

A HECs loan (or higher education costs loan) is designed to make education after high school an achievable goal despite expensive university course fees. The government defers these fees (excepting textbook costs and other small expenses) while the student studies. Once they leave university and take up full time employment, the Government begins to take money from their weekly pay to recoup the HECs debt.

A university degree can cost as little as $13,000 for a three year degree, while more expensive courses may reach anything past $20,000. Furthermore, some degrees go for four or five years, and will end up costing much more than this.

So what does this mean for the average graduate?

Paying off your HECs loan

The best thing about HECs is that it is 100% interest free: forever. That means you shouldn't worry about the shadow of your debt hanging over you getting any larger. It’s the cheapest loan you will ever get so don’t be tempted to borrow from other sources to pay it off. HECs debts are subject to changes in inflation, but this won’t impact graduates dramatically.

If you do make a voluntary repayment towards your HECs loan, you’ll receive a bonus 10% on top for contributions over $500. This might be a wise move if you want to get rid of large sums of your debt quickly. However, most graduates simply won’t have the spending power to do this.

Below is a table of how much you’ll be debited each year:

*HELP repayment income (HRI)**	Repayment rate
Below $47,196	Nil
$47,196-$52,572	4% of HRI
$52,573-$57,947	4.5% of HRI
$57,948-$60,993	5% of HRI
$60,994-$65,563	5.5% of HRI
$65,564-$71,006	6% of HRI
$71,007-$74,743	6.5% of HRI
$74,744-$82,253	7% of HRI
$82,254-$87,649	7.5% of HRI
$87,650 or more	8% of HRI

*HRI = Taxable income plus any total net investment loss (which includes net rental losses), total reportable fringe benefits amounts, reportable super contributions and exempt foreign employment income. Information provided by the Department of Education, Employment and Workplace Relations.

From the above figures (current as of 2011), you should be able to calculate roughly how long it will take to pay off your debt. Regardless of which degree you've completed, you should still expect to be paying off your HECs loan for several years.

It’s important to note that despite the high costs of study, a university education in Australia is still worth the debt. A substantial, reliable income in your future outweighs losing a little bit of money every week.

If you can manage it, put some money away whenever possible and put it into a savings account. Once this account reaches any amount over $500, make an extra HECs repayment to reduce your debt (and be rewarded with the 10% government bonus). Otherwise, focus on your career, and your HECs repayments will be automatically deducted from your pay – and will mostly remain out of sight, and out of mind.

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