Not everyone has the ability to pay their HECS (Higher Education Contribution Scheme) bill upfront (also known as HELP debt), but that doesn’t mean that there aren’t ways you can reduce your HECS debt as you go.
Firstly it is important to see your HECS (HELP) debt not as a burden but an investment in your career and future. By keeping a positive attitude about it, you will be able to budget more for it and find ways to live around it whilst paying your debt off quickly and easily.
Paying more of your HECS/HELP debt from the start
Firstly – this will only relate to some lucky people, but remember that thanks to the new federal government incentive scheme, maths and science bachelor degrees have become much more affordable at almost half the price.
For these graduates you can also half your HECS repayments after university by undertaking employment in these fields. Other fields of study also have lower HECS fees depending on what band they are in so it is worth researching these options before entering university.
For other people who are not interested in pursuing these areas there are other ways to save money on your HELP fees.
If you are lucky enough to be able to afford to pay the full amount of each subject upfront (or even partial if its over $500), you can receive a 10% reduction in fees. Not only do you finish university without owing as much money, you also pay less then someone else who has deferred all of their payments.
The majority of students do defer their HECS simply because they do not have available funds or need to use their income on other priorities. This incentive scheme may change from January 2016 but is still currently available.
When do you need to start repaying HECS/HELP debts?
You will need to start making compulsory repayments once you meet the require ‘compulsory repayment threshold’ regardless of whether you are still studying or not. The current threshold changes year by year but it current set at $54,126.
The amount you need to repay is tiered; meaning you will pay more as you earn more. To see a full table of the different tiers, check out StudyAssist. Repayments start at the threshold above and work out to be between 4-8% depending on your earnings.
Methods to pay back your HECS Debt
It is wise to note that any repayments above $500 grant you an instant 5% bonus. This means you pay $500 and receive $525 off your HECS/HELP debt. A return of 5% is rather good!
Use unexpected lump sums to voluntarily repay your HELP debt
Whenever you receive a lump sum of money, whether it be a birthday gift, work bonus or once off large tax return – opt to put it onto your HECS/HELP debt to dramatically reduce the amount you owe. Given you didn’t expect the lump sum in the first place, putting it towards a debt (whether it be a credit card or a HELP debt) will give you a strong sense of accomplishment and work towards freeing up your cash flow.
Save a portion of your pay with intent to turn it into a HELP repayment
Set up a regular savings plan with your employer or bank to save small but meaningful amounts of money. Filtering small amounts of cash on a weekly, fortnightly or monthly basis can quickly add up. Even if you save as little as $10 per week, that’s $520 of debt you can repay at the end of the year.
Find ways to save money, use the cash flow to repay your HELP/HECS debt
Consider small and incremental ways to save money – this will free up your cash flow, reduce your spending and allow you to have excess money to contribute towards your HELP debt. Start by looking at the small change resolution and then consider adopting a few strategies from the 100+ ways to save money.
Use automated payments via BPAY or direct credit to lower your HECS/HELP debt
You can call the tax office to receive your BPAY or direct credit details; this will give you a unique set of banking details to make regular payments to. Consider setting up automatic BPAY payments or similar on a regular basis. You could even set this up with your savings account to deduct and pay a regular recurring amounts.
Remember, while HECS/HELP debt doesn’t accumulate interest – it does get indexed with inflation
This means that your debt does indeed grow each year, circa 1-4%. Making voluntary repayments, along with repayments that are automatically deducted by the ATO will see your debt lower exponentially over time. Remember, if you have other debts (such as personal loans and credit cards) – these are likely costing you more in interest which means it would be wise to methodically pay these off either first or at an 80/20 split to make progress on all fronts.