HECS. It’s thrown around heaps when you’re finishing high school and starting uni…
But, what actually is HECS?
Most people have no clue what it is and how it works. If you’re thinking of studying in Australia after high school, it’s probably a good thing to understand because it basically lets you study without paying a cent (yet).
Table of Contents
What is HECS?
HECS stands for Higher Education Contribution Scheme.
A HECS debt or HECS-HELP loan (same thing) is a government loan handed to students who are studying higher education in Australia.
A HECS-HELP loan allows students to study their degree without paying any money upfront, and then pay off the interest-free debt after they begin working full-time.
Most people apply for HECS-HELP following high school when they start studying at university or TAFE.
Am I Eligible?
HECS-HELP is available to all students studying at a Commonwealth Supported Place (CSP) provided they:
- Are an Australian Citizen
- Or, a New Zealand Special Category Visa (SCV) holder or permanent humanitarian visa holder and meet the residency requirements
- Are an enrolled student at the census date
- Have submitted a valid HECS-HELP request to their institution prior to the census date
Basically, if you’re an Aussie resident studying at university, you should be eligible for HECS-HELP.
They do cap the loans at a certain point but you don’t need to worry about that if this is your first or second degree. In 2021, loans are capped at $108,000 for most courses (except medicine, dentistry, veterinary science and aviation which is capped at $150,000).
Did You Say it’s Free?
I mean, it’s not free. But, you don’t have to pay anything upfront.
The HECS-HELP loan is interest-free, however, is indexed to inflation.
In simple words:
You don’t have to pay interest on the loan, but as the economy grows and prices rise, the value of the loan will increase with it.
You also don’t have to pay anything back until you start earning around $46,000 a year.
When you hit that mark, you’ll start paying incrementally more as your income increases.
The money is taken from your pre-tax earnings so you’ll hardly notice any changes. Basically, when the RTO taxes you each payday, they’ll take a little more to pay off your HECS debt.
The repayment brackets are specified in the table below:
Repayment Income (RI) | Repayment Rate |
Less than $46,620 | Nil |
$46,620 - $53,826 | 1.0% |
$53,827 - $57,055 | 2.0% |
$57,056 - $60,479 | 2.5% |
$60,480 - $64,108 | 3.0% |
$64,109 - $67,954 | 3.5% |
$67,955 - $72,031 | 4.0% |
$72,032 - $76,354 | 4.5% |
$76,355 - $80,935 | 5.0% |
$80,936 - $85,792 | 5.5% |
$85,793 - $90,939 | 6.0% |
$90,940 - $96,396 | 6.5% |
$96,397 - $102,179 | 7.0% |
$102,180 - $108,309 | 7.5% |
$108,310 - $114,707 | 8.0% |
$114,708 - $121,698 | 8.5% |
$121,699 - $128,999 | 9.0% |
$129,000 - $136,739 | 9.5% |
$136,740 and above | 10% |
For instance, if you’re earning a salary of $70,000 each year, the RTO would be taking 4% of that per year to pay off your student debt.
That’s $2,800 per year or $54 per week. However, you wouldn’t really notice because it doesn’t even get the chance to hit your bank account.
What Else Should I Know?
Will it Affect my Credit Score?
Short answer: No.
Longer answer: Kind of.
It won’t directly affect your credit score, however, banks will take your student loan into consideration when you apply for a credit card, a home loan or any sort of personal loan (i.e. to buy a car).
Essentially, you should be fine so long as your HECS-HELP debt is a reasonable level (say one or two degrees) for your age.
Following your undergrad degree, you may want to think about paying some of it off before you undergo postgrad study.
Should I Pay it Back Early?
The only incentive for paying off your student loan is to have a debt-free name.
Because this loan is interest-free, you aren’t really losing anything by not paying it off earlier rather than later.
Instead, it would be smart to focus on paying off other loans such as your credit cards and car loans before your HECS debt.
These have much higher interest rates than the inflation rate to which your student loan is indexed.
So pretty much the answer to this question is:
Yes, if you have no other loans and you have way more money than you know what to do with. Otherwise, no.
SA-HELP Loans
This last one is pretty important.
An SA-HELP loan helps students pay their Student Services and Amenities Fee (SSAF).
The SSAF is a small fee that all universities charge to pay for services on campus (think financial services, counselling, bathrooms, etc.). It’s charged every session and will never exceed $308.
But, if it isn’t paid, students won’t get access to their marks after the session.
An SA-HELP loan is like HECS, however, it’s provided to students so they don’t have to pay their SSAF upfront.
Essentially, it’s the same as a HECS-HELP loan, just for a much smaller amount and different purpose.
The processes are all very similar but it’s important to know that they are separate things and require separate applications.
I’m hoping you now fully understand what a HECS loan is and how it’s gonna let you study without paying a cent upfront.
If you still have questions, leave a comment below, email me or check out the StudyAssist website for more information.
Some other blog posts I think you’ll enjoy reading:
- 8 Laptops Perfect Uni Students
- How to Find the Degree of Your Dreams
- Teaching you the Ins and Outs of Uni before Day 1
Until next time,
Uncle N.