HECS and HELP Loans
- D. M. Wright
- Feb 21
- 5 min read
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WHAT ARE HECS AND HELP LOANS?
HECS
Higher Education Contribution Scheme
University only.
HELP
Higher Education Loan Program
TAFE, University and Colleges.
There is not a whole lot of difference between them these days that in speaking about them, the terms are usually interchangeable. Some degrees are only eligible for HECS. Other degrees and diplomas are only eligible through HELP.
Click HERE to see their website for full details on the differences. But there is unlikely any choice in which you get. You choose the degree, and the government has already determined the loan scheme available for that course.
DO I NEED A HECS / HELP LOAN?
Avoid a HECS / HELP debt if you can help it. Yes, the loans are there to help those without money to access higher education: if you want to study an expensive degree for a dream career, then have at it. That's why these loans exist.
But if you don't want a huge debt to your name that you'll be paying for decades to come if you're not careful, consider other jobs that don't even need university studies.
Tradies like carpenters, plumbers, electricians, builders don't need it. And they pay well; sometimes as much as those jobs that need a degree. Sometimes, they pay even more!
Other professions that pay well enough only require TAFE, which have much lower fees for studying certificates.
Consider gardening, hairdressing, community services, aged care, enrolled nursing, photography.
Consider police, fire and rescue services.
Consider pilots, attendants and baggage handlers.
The point really is, don't go off and get a university degree as if it's the done thing to do;
as if smart people must go to university just to prove their intelligence;
as if having a degree on your resume will definitely get you a job.
Consider how many people who drive taxis have university degrees... and a mountainous HECS debt. You could just go drive taxis for good pay and a good living, and not have an idle degree on your resume, while paying off thousands each year to the government.
Consider the train driver who did a drivers' course to be qualified; the truck driver who got their truck licence.
Consider the car seller, the butcher, the baker, the cabinetmaker.
Consider the aircraft engineer on a six-figure salary who completed a Traineeship.
Consider how long it will take you to pay off your HECS debt.
Check out our HECS repayment calculator to give you a fair idea on how long.
Consider - if you intend on raising a family - how a HECS debt is going to affect your everyday expenses.
Do you want to juggle paying your debt as well as all the expenses children incur?
Do you think the job you might get after university would be able to pay off your entire HECS debt before you have your first child?
Going to university and incurring an education bill is not the only option available to you.
HECS CAN SOMETIMES BE UNAVOIDABLE
Unless you or your parents can pay for your studies upfront, a HECS / HELP loan may be unavoidable. Some professions must have a degree.
Consider doctors, lawyers, engineers, social workers, registered nurses.
Consider architects, physicists, pharmacists, chemists, radiologists, researchers and teachers.
Have you got a debt now? Or about to start one? Let's work on how to pay it off!
HECS AND COMPULSORY REPAYMENTS
Compulsory repayments will be taken out of your tax every JUL-OCT when you complete your tax return.
The amount you are required to repay differs based on your earnings.
Compulsory repayments barely scratch the surface of how much you would likely need to pay per year to ever clear your debt.
Compulsory repayments are the bare minimum. Using them alone to pay off your HECS debt could genuinely take fifty years unless you are earning such a significant wage that your compulsory rate is quite high.
It is recommended when planning your own repayment plan that you do not even add your estimations into your calculations. Pretend the compulsory repayments don't exist, then just be excitedly surprised when your tax pays off a little chunk like it's a cash bonus.
COMPULSORY REPAYMENTS BILL
If you have accumulated quite a huge HECS debt AND you are starting to earn a substantial amount, be aware that your compulsory repayment rate can jump several percent.
When you complete your tax return, you may discover that you have not paid enough tax and you owe the ATO money. If this happens, you will only have about 6 months (end of March the following year) to pay what you owe.
This will be something that you cannot fix for this year. You'll just have to pay it and budget it in with everything other one of your expenses.
Take note that, no matter how much money you send the ATO to voluntarily pay down your HECS, not a cent will be counted toward the calculation of your compulsory repayment.
WITHHOLDING AN EXTRA 1% TAX
To avoid the problem (or fix the problem so it does not occur again the following year), you can ask your employer to have Payroll/HR add a 1% extra tax to your wage.
Note: Some employers will not process by percent, rather you must provide a set nominated amount of extra tax withheld.
When the 1% extra tax is added, your employer will withhold that little bit extra money, which will then cover next year's HECS compulsory repayment.
If in your next year's tax return, you receive money back after paying too much tax, then this trick has prevented another bill.
If you still receive a bill because you have not paid enough tax to cover your HECS compulsory repayment, then up your extra tax to 2%.
Once you've paid off your HECS, you can ask your employer to cease withholding extra tax.
REPAYMENTS WHEN STARTING UNIVERSITY
You will help yourself immensely if you can start HECS repayments as soon as you begin university, not waiting until after you've completed your degree.
Students have bugger-all money.
We've all been there.
The best recommendation we can give you is to repay $1 per day per year.
While you earn less than the Compulsory Repayment threshold, these small additions will cut deeply into your final graduation debt.
When you do graduate, you can use the downloadable Repayment Plan to get you down to $0.
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