Student Debt: HECS & HELP
Many are concerned about what a 7.1% interest rate increase for balloon HECS & HELP loans this July could mean for their student loan balances.
HELP debts are indexed annually to maintain their real value by adjusting them in line with changes in the cost of living as measured by the consumer price index, otherwise, they are interest-free. The indexation adjustment is made by the ATO on 1 June each year and applies to the portion of the debt that has remained unpaid for more than 11 months.
Educational fees are only tax-deductible if paid via a salary-sacrifice arrangement (where an employer pays for the fees incurred before they become a HELP debt) or if they are incurred for self-education purposes.
However, if you are able to pay off a portion of your debt, you may want to do it now to avoid an inflated increase in your debt. Get in touch with your accountant or advisor to determine what the best outcome is for your situation.
The average balance of a HECS Debt/HELP Loan is around $22,636.
However, many students may find themselves with loans in greater excess of this amount long after finishing their studies. This is particularly the case when indexation of the loan occurs year after year
If you’re guilty of thinking about your student debt as a ‘set and forget’ loan, or believe you can claim back on any repayments you make, you could be in a pickle next financial year.
While it could be beneficial to invest money into paying off part of your student loan (and reducing the balance before it is indexed on the 1 July), don’t be mistaken in thinking you can claim that money back on your tax return.
Thank you for reading!
Should you have any queries in regards to the above please contact our office on (03) 9728 1448
The TAS Team
3/653 Mountain Highway, Bayswater VIC 3153
Dorothea Farmakis (CPA)
Dorothea, our CPA Qualified Accountant (Registered Tax Agent), has over 25 years experience within international corporate firms in Accountancy, Funds Management and Asset Management for firms such as HSBC, P&O, Lend Lease and more.
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