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How the HECs repayment changes are going to affect you
Julian Parsons

How the HECs repayment changes are going to affect you


Do you have a HECS debt?

If you do, then you’re certainly not alone, with around one in 10 Australians holding a HECS debt. Australians are extremely lucky in that we are able to take out interest free student loans to allow us to study without significant financial pressure (we’re looking at you USA). 

However, there will come a time in your life when you have to begin paying it back. With a great number of living expenses, bills and plans to save for something special, HECS debt repayments are just one more thing you have to factor into your monthly expenses. 

You may have seen that as of July 1st 2019, there have been changes made to Australia’s HECS (Higher Education Contribution Scheme) loans.

The major changes? The threshold for repayment dropped by over $6000, and revised income brackets were introduced.

So what does this mean for you? 


The lower threshold

Two years ago, the HECS repayment threshold sat at $55,874. The Australian Coalition government then lowered it to $51,957 in the 2018/19 financial year. Anyone earning an amount under this amount was not required to make any contributions towards paying off their loan.

As of July 1st, the threshold is now $45,881. This is a drop of over eleven percent and means that as many as 136,000 people will be affected!

These changes will mean greater hardship for low income earners, as stated by 1300 numbers expert Neil Royle who advises, “if you are earning below $55K, it is likely that your money may already be stretched quite thin between rent, bills, groceries and saving for future goals such as a home or family. For the thousands of people who now earn above the new threshold, this means being even further spread after factoring in their newly required HECS repayments. The impact of this going forward is unclear, but will likely result in a greater number of people suffering financial hardship.”


Changes to income brackets

The amount you pay towards your HECS each paycheck is a percentage of your earnings dependent on your income. For people who earn just above the threshold, it is 1%, going all the way up to 10% for people earning over $137,898. You can find a table outlining the 2021/22 brackets here.

These percentage brackets have also shifted with the new financial year so even if the lower threshold does not affect you, you may still be required to pay more than you previously were. 

With 2.9 million Australians holding HECS debts in 2018, these changes are going to affect many people in similar ways to Carly. 



In regard to mental health 

By lowering the threshold and shifting the repayment percentage brackets, there will be greater financial strain placed on university students and graduates. Many graduates with HECS debts are relatively young and may be at a stage in their life where they are looking to buy a home or start a family. Greater financial pressure to repay their loans will mean that they may have to postpone such life milestones until they are in a more stable financial place. 

Integrative Psychotherapist Natalie Wood says constant financial stress can be detrimental to mental health because it can increase cortisol levels in the brain and cause the chemical imbalances that characterise mental illness. Being aware of how your finances are affecting your mental health and seeking help when nessecary is imperative. 

What should you be doing? 

The best thing that you can do is be aware of what kind of repayment values you are expected to make in alignment with the new changes. Factor these repayments into your budget as you would any other income tax and plan your expenditure from there.

This is especially important if you have multiple sources of income (such as a second job or your side hustle selling baked goods at the Sunday markets). Brisbane security alarm installer Mushir says that “as a business owner who once had a HECS debt, I know how confusing it can be when changes are made. If you have uncertainties on anything HECS or tax related, book an appointment with a finance professional who can give you clarification.”

Tax specialists will be able to help plan and manage your money, tax and HECS appropriately. It’s always better to be prepared and pay the correct amounts throughout the year so that, come tax return time, you don’t get a shocking tax bill instead of that return you were planning on adding to your holiday fund.

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