If you’re a former university student, you may have a HELP debt that you’re slowly paying off. However, it’s important to know that this debt is set to increase by 7.1% in June, which will affect many Australians who have borrowed money from the government to fund their education.
The Higher Education Loan Program (HELP) debt is essentially a loan provided by the Australian government to eligible students to help pay for their university tuition fees. The debt is then repaid through the tax system once the student earns above a certain income threshold.
For the 2021-22 financial year, the HELP debt income thresholds are as follows:
- For residents of Australia who are working full-time, the income threshold is $47,014. This means that if you earn $47,014 or more in the financial year, you will be required to make repayments towards your HELP debt.
- For residents of Australia who are working part-time, the income threshold is $30,725.
- For Australian residents who are living overseas, the income threshold is $1,587 per week or $82,734 per year.
- For non-residents of Australia who are living overseas, the income threshold is $46,620.
The HELP system ensures that students are able to access higher education, regardless of their financial situation, while also ensuring that they are able to repay the money once they are able to do so.
Due to the recent high inflation rates, all HELP debt balances are set to increase by 7.1% in June 2023. For example, if you currently have a HELP debt of $20,000, your debt will increase by $1,420, and your new total debt will be $21,420.
This change will impact all of those with a HELP debt on that date, regardless of whether they are earning above the repayment threshholds.
If you’re concerned about the impact of this increase on your finances, there are a few things you can do. Firstly, you can make voluntary repayments towards your HELP debt to reduce the amount of indexation that accumulates. This can also help you pay off your debt faster, which can be a good strategy if you’re able to do so.
What are the downsides to making Early HELP Debt repayments?
The downsides to making early Higher Education Loan Program (HELP) debt repayments you may miss out on potential investment opportunities that could earn you a higher rate of return than the interest charged on your HELP debt (ie. repaying your home loan or investing into the sharemarket. Additionally, if you make voluntary repayments before you are required to, you will not be able to access those funds for other expenses should they arise.
Overall, it’s important to be aware of the upcoming HELP debt increase and to take action if you’re concerned about the impact on your finances. By staying informed and taking proactive steps, you can ensure that you’re managing your HELP debt in the best way possible.