When you should wipe a HELP debt

UNIVERSITY debt is one of the cheapest debts you can have, but many Australians owe money for studying that they may never pay off. The latest Australian Taxation Office statistics show more than 2.8 million people have HELP (Higher Education Loan Program) debts totalling $61.9 billion. This has more than doubled since 2014. And more than 18,700 people have debts of above $100,000. While students can delay paying off HELP debt – an interest-free loan for studying at an approved higher education provider – it can take years to repay. The debt does not attract interest, but the loan balance is indexed on June 1 each year, in line with changes in the cost of living, as measured by the Consumer Price Index. The current rate is

1.9 per cent.

ATO assistant commissioner Gavin Siebert said for people planning to wipe their debt earlier, there was one optimal time to do it. “If you plan to pay off your total loan balance with a voluntary repayment, it’s best to make your repayment before you lodge your tax return or declare your worldwide income,” he said. “If you intend to make a voluntary repayment before indexation is applied, it is important to allow enough time for the payment to be received and processed by us before 1 June.”

There used to be financial incentives to pay off HELP debts early but these no longer exist.

If you move overseas you still have to pay back your HELP debt by declaring your worldwide income and reporting it to the ATO by October 31 each year.

For people paying back the debt from their regular salaries, automatic repayments kick in once they earn more than $51,957 annually.

The repayment threshold rates start at 2 per cent of the debt, before climbing in increments up to 8 per cent once personal income reaches $107,214. Rising Tide Financial Services director Chris Browne said HELP debt was a great way to access education, and prioritising paying the loan wasn’t necessary if you had other debts. “Paying off credit cards, setting up a regular savings plan into a high interest account, or making extra repayments on to your home loan are much better ways to use your money than making voluntary repayments on to your HELP debt,” he said.

“If you don’t have a home loan or maxed-out credit cards, maximise your super contributions before the end of this financial year.” People with a debt can make voluntary repayments via BPAY, or by using a debit or credit card. moneysaverHQ.com.au