HELP! 2.89m wearing the burden of study costs

UNIVERSITY students are preparing to return to their studies in the coming weeks but for many it comes at a significant cost.

The nation’s outstanding Higher Education Loan Program (HELP) debt at the end of 2019 totalled $66.4 billion, owed by 2.89 million Australians. The average HELP debt is $22,944.

It climbed from the 2017-18 financial year, when $61.7 billion was owed by 2.87 million people.

The debt includes university, VET, trade, start-up and ABSTUDY loans.

For 2019-20, the repayment threshold to start paying back debt has been reduced by about $6000 to $45,881, resulting in more people being forced to pay back their debt earlier.

Repayments begin at just 1 per cent of a debtor’s salary, but then rises in increments of 1 per cent up to 10 per cent for those earning $134,573 and above.

The cost of many courses can run into tens of thousands of dollars, but most people choose to not pay back their debts until they start working.

Lifespan Financial Planning chief executive officer Eugene Ardino said there was no need for those with HELP debts to rush to pay it back.

“If you have got other debts, it’s the very last debt you pay off,” he said.

“The only time I would pay it down early is if you have money ... in a savings account and you are earning even less in interest.”

Unlike most debts, which attract significant interest charges – such as credit cards, which charge about 20 per cent in many cases and personal loans at usually above 10 per cent – HELP debts do not attract interest.

Instead they are indexed to align with Consumer Price Index inflation, which is currently 1.8 per cent. On June 1 each year the debt is indexed.

An ATO spokeswoman said debtors often made voluntary repayments to help pay down their debt at a faster pace.

From July to December last year, ATO figures showed 43,500 Australians made voluntary repayments totalling $189.6 million, or an average of $4360 each.

“We certainly see people making voluntary repayments all the time,” the spokeswoman said. “If you are planning to repay your loan in full, the best time to make a voluntary repayment is before you lodge your tax return.

“You may also benefit if you make a voluntary repayment before indexation is applied on June 1.”

Those owing money can log in to myGov to keep track of their debt.

The ATO spokeswoman said, once the debt was fully paid off, a person must advise the department by completing a Withholding Declaration form.

Repaying the loan back sooner will also mean they have access to more of their salary instead of it being withheld to contribute to study debt.