Updated 27th August 2013.
Note to readers: The Government will be ceasing the 5% discount for voluntary HECS/HELP repayments on the 1st January 2014. This means if you want to get an instant 5% return on your investment, you should look to repay your HECS/HELP debt in full or make a repayment of $500 or more (minimum) to receive the 5% discount.
Recently I decided to check my HECS debt balance (now referred to as HELP debt). This is the Government funded loan that is available to students to fund their higher education at University (duh!).
I have been slowly paying it off with each fortnightly pay cheque from my day job, though it occurred to me that once my debt is gone – I will basically get a pay rise (as the ATO won’t be taking out a repayment every fortnight).
This really excited me so I decided to go about learning more about whether or not I should pay off my HELP debt in full and how it is I would go about it.
Here is what I found and why I am super keen to pay off my HELP debt voluntarily.
Get an instant 5% return by paying off your HELP debt
Most people already know this, though if you were to make a voluntary repayment – you get an immediate 5% discount. So say you had $10,000 owing on your debt, instead of paying the full amount – you would be able to repay only $9,500 – an immediate $500 discount.
Not a bad return really (better than most big bank savings accounts!).
You get more money in your pay cheque
This is what excited me the most. Once you start to earn over a certain amount (can’t remember the number?) – the ATO starts to take out a certain percentage of your pay to cover the debt as a tax.
By paying my debt off in full, I will straight away be able to stop paying this extra amount of tax.
A great way to have a quick pay raise and a few extra dollars in the disposable/non accounted for income bracket.
How to make a voluntary repayment and pay off your HELP debt
Everyone seems to be quite stuck when it comes to checking their balance and knowing how much they owe on their HELP/HECS debts.
I found the easiest and quickest way is to ring the ATO directly.
Here is the phone shortcut to getting straight to someone on the topic of HELP/HECS debt repayment:
Firstly you will need your tax file number, bank BSB and bank account number (if you don’t have these, don’t worry). You can race ahead by following the below instructions to avoid waiting for all the prompts.
- Ring: 13 28 61
- Press 2 for high education loans
- Press 2 again
- Enter your TFN and then press #
- Enter your date of birth and then press # – format is 10 08 1980 (for 10th August 1980)
- Enter your 6 digit BSB number – if you don’t have this press #
- Enter your bank account number – if you don’t have this press # to go to operator.
You are now officially past the queue of prompts and waiting for an operator.
- Ask them for balance.
You then need to request your ‘PRN’ – or payment reference number. This will allow you to make a direct repayment to your debt.
You will then be able to make a BPAY (Biller code: 75556), Credit card (fees apply, beware!) or direct credit repayment. Simple.
Reasons why some might say not to pay your HELP debt off
Most people will argue that HELP/HECS debt is the cheapest debt on offer. This is true, compared to the likes of credit cards and other higher interest products. In my head, I would likely focus on those higher interest rates first, though if you don’t have these – repaying your student debt could be a great option.
5% immediate return + you will get more money in each pay cheque to work towards your goals.
Did you know you pay interest on your HELP/HECS debt?
It may not be much, though your HECS/HELP debt gets interest charged in line with inflation. For instance, in 2011/2012 – the interest charged was 2.9%.
2.9% of $10,000 is $290, not a whole lot but still not great either.
Tell us, are you going to pay off your HELP debt in full?
Drop us a comment below with your thoughts.