With the cost of living on the rise, it’s important for individuals who have a Higher Education Loan Program (HELP or HECS) debt to be prepared for potential increases. In this article, our expert financial advisors will provide insights on what you need to know about HECS-HELP indexation.
What Does HECS-HELP Stand For?
HECS-HELP is a federal government program that offers loans to students in Australia. For many students, their tertiary education course will be considered a Commonwealth Supported Place (CSP), where the federal government covers a portion of their university fees and the student pays the rest, known as the “Student Contribution amount.” Students who are not enrolled in a CSP are considered to be in a “fee-paying place” and may have different types of loans under HELP, such as FEE-HELP for tuition in a fee-paying place, SA-HELP for student services and amenities fees, and OS-HELP for students’ expenses if they are enrolled in a CSP and want to study overseas. Students can view their HECS-HELP debt online at the Australian Taxation Office (ATO) website or through the myGov app.
Do You Pay Interest on a HECS-HELP Debt?
Technically, HECS-HELP debts are interest-free. However, the debt is indexed to keep up with inflation, which means that the overall debt increases over time. Inflation, also known as the Consumer Price Index (CPI), is a set of figures released by the Australian Bureau of Statistics (ABS) every three months to track the cost of living. Indexation is applied to HECS-HELP debts on June 1st each year.
What is the 2022-23 HECS-HELP Indexation Rate?
The exact indexation rate for 2022-23 is not yet known, as the ABS has not yet released the figures for the March quarter. The figures will be available on April 26th, and the indexation rate will be officially announced by the ATO Commissioner via the Commonwealth Gazette. However, it is forecasted to be roughly 7 percent. In previous years, the lowest indexation rate was in 2021 at just 0.6 percent, and the highest was last year at 3.9 percent.
Is HECS-HELP Still a ‘Good Debt’?
Despite the potential increase in indexation, getting a good education is still considered a valuable investment in the long run. Careers are far more important than the short-term impact of indexation on HECS-HELP debts. Higher education can lead to better job opportunities and higher earning potential, which can outweigh the impact of indexation in the long term.
Should I Make Voluntary Repayments to My HECS-HELP Debt?
Whether or not to make voluntary repayments to your HECS-HELP debt depends on your circumstances, and it’s important to consider your financial situation carefully and consult a professional for tailored advice. Our professional advisors can review your current situation and create a dedicated financial plan that aligns with your personal needs and goals.
You can make voluntary repayments to your HECS-HELP debt at any time you wish. If you would like to make a repayment before the next round of indexation is applied, time is of the essence. “If an individual wishes to pay off their loan balance in full prior to indexation being applied, it needs to be done with sufficient time to allow the payment to fully process through the banking systems to reach the ATO accounts before midnight, May 31st,” says an ATO spokesperson. “Any voluntary repayment received prior to May 31st will reduce the balance used for indexation calculation.” The ATO also advises that it’s best to make
How to avoid indexation before June 1?
The Australian Taxation Office (ATO) advises that it’s best to make voluntary repayments towards your HECS-HELP debt before you lodge your tax return or worldwide income. This is because if you lodge your tax return or worldwide income before the voluntary repayment is credited to your account, a compulsory repayment or overseas levy might still be taken out of your return.
One option to avoid indexation before June 1 is to pay off your HECS-HELP debt in full via a voluntary repayment. However, it’s important to note that voluntary repayments are processed at the time of your tax return, and indexation will be applied to your balance before this financial year’s PAYGW (Pay As You Go Withholding) instalments are deducted. This is because indexation applies on June 1.
It’s worth noting that tax returns for 2022-23 cannot be filed until after the end of the financial year on July 1, which is a month later. Therefore, making voluntary repayments before lodging your tax return can help you avoid indexation before June 1 and potentially reduce the amount subject to indexation, providing you with potential savings on your HECS-HELP debt.
The content of this article provides a general guide to the subject matter. You should seek specialist advice about your specific circumstances.
Vogue Advisory Group – How We can Assist you with your HECS debt
At Vogue Advisory Group, we understand the implications of indexation on accumulated HECS-HELP debt. On 1 June each year, indexation is applied to HECS-HELP debt that has remained unpaid for more than 11 months, and the expected annual indexation for 2023 is over 7%, subject to the March quarter inflation outcome.
One effective way to reduce the impact of indexation is by making a voluntary repayment before this date. A voluntary repayment before 1 June will reduce the balance that indexation applies to. If your HECS-HELP debt balance is $0 on 1 June, then indexation won’t apply to your study or training loan.
Our experienced team of financial advisors can review your personal financial situation and provide tailored advice on the best-suited options to repay your HECS debt and avoid indexation before June 1. We consider your circumstances and financial goals to create a dedicated financial plan that aligns with your needs.
It’s important to prioritize your debts based on their interest rates. If you have other debts with higher interest rates such as credit cards, personal loans, or car loans, it’s advisable to repay those debts first before focusing on your HECS-HELP debt.
If you don’t have other debts and have surplus cash, we can help you weigh up the options between repaying your HECS-HELP debt and other financial goals such as saving for a house deposit or retirement savings.
Contact us today to discuss how we can assist you in effectively managing your HECS debt and avoiding indexation before June 1.
