How Much HECS Do I Pay? An Overview of HECS in Australia
27 Sept 2017
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 (higher education costs loan), or the HECS-HELP Loan Program, 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 about $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? Read on to find out.
The following table displays a snapshot of savings accounts on Canstar’s database with links to providers’ websites, sorted by the total interest rate (highest to lowest). The results and Star Ratings shown are based on a regular saver in NSW with $5,000 in current savings.
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.
How much HECS do I pay?
In the 2016/17 financial year, the HECS repayment rates were the following:
| HELP repayment income (HRI*) | Repayment rate |
|---|---|
| Below $54,869 | Nil |
| $54,869 – $61,119 | 4% of HRI |
| $61,120 – $67,368 | 4.5% of HRI |
| $67,369 – $70,909 | 5% of HRI |
| $70,910 – $76,222 | 5.5% of HRI |
| $76,223 – $82,550 | 6% of HRI |
| $82,551 – $86,894 | 6.5% of HRI |
| $86,895 – $95,626 | 7% of HRI |
| $95,627 – $101,899 | 7.5% of HRI |
| $101,900 and above | 8% of HRI |
2017/18 HECS changes
However, the compulsory repayment system is adjusted each year. While the above table shows the HECS thresholds for 2016/17, soon-to-be graduates will need to read the updated table for the next financial year.
Below is a table of how much you’ll be debited during the 2017/18 financial year. Payments are subject to change on July 1 each year. You can see the full list here.
| HELP repayment income (HRI*) | Repayment rate |
|---|---|
| Below $55,874 | Nil |
| $55,874 – $62,238 | 4% of HRI |
| $62,239 – $68,602 | 4.5% of HRI |
| $$68,603 – $72,207 | 5% of HRI |
| $72,208 – $77,618 | 5.5% of HRI |
| $77,619 – $84,062 | 6% of HRI |
| $84,063 – $88,486 | 6.5% of HRI |
| $88,487 – $97,377 | 7% of HRI |
| $97,378 – $103,765 | 7.5% of HRI |
| $103,766 and above | 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 Australian Taxation Office (ATO), obtained on 27 Sep 2017.
How long will it take to pay off my HECS-HELP debt?
From the above figures (current as of September 2017), 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. To calculate your tax, check out our Income Tax Calculator or the ATO’s Tax Calculator.
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