What You Need to Know About Changes to the HELP Loan Repayment Threshold

From 1 July 2019, HELP loan repayment thresholds are changing.

We don't want to send you into shock, but while going to university or some TAFE courses might feel free, it's definitely not.

Thankfully, Australian citizens are graced with the Higher Education Loan Program (HELP), which allows budding university students to forego the upfront course and amenities fees and pay them back at a later date when they can reasonably afford them (i.e. when they're earning a decent salary).

In recent years, however, with more and more students deferring their course costs to HELP, the government (of which, many of its members personally benefitted from free university education) are looking at this ballooning cost and declaring something be done about it...

To start with, they're putting all the student loans together. That's HELP, VET Student Loan (VSL), Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL) and ABSTUDY Student Start-up Loan (ABSTUDY SSL) as well as the Trade Support Loan (TSL). Let's collectively refer to them as the loans.

And so, from 1 July 2019, the when and how much you pay back of your loan will change, starting with...

The repayment threshold will be lowered again...

Now, anyone earning $45,881 (around $8,000 more than minimum wage) will be expected to start paying back the loans at a rate of one per cent as long as your total income is also below $52,973. Let's dive into what that means a little further...

Repayments are based on your salary.

The TL;DR of it all is that the more you earn, the more you pay back of your loan. Earning between $45,881 and $52,973 might mean only one per cent of your loan is required to be paid back each financial year. However, if you're earning $60,000, for example, your repayment jumps two brackets to three per cent. Are you a miracle graduate and earning $80,000? You'll need to pay back 5.5 per cent. (Check out the repayment brackets here.)

How much could that be?

HELP loan repayments are paid on top of your regular taxes. So, if you're starting with a salary of $50,000 before tax, you'll need to deduct taxes (the tax calculator estimates around $7,797). Then, you'll need to factor in your loan repayment, which according to the loan repayment calculator, is around $500 based on a $30,000 study debt. You'll likely also have to pay the Medicare Levy tax as well, which the calculator estimates is around $1,000 if you have no dependents. After all that, you're left with a take-home salary of a little more than $40,000.

Did you do postgraduate studies as well? That one per cent repayment (if your salary is still under $52,973) will be just below $1,000 (if your debt is around $60,000) and each percentage increase will certainly sting.

Thankfully, if you have just the one income stream (AKA a full-time job) and you've ticked the right box on your tax form when you started, your workplace should automatically take your taxes and HELP loan repayments out of your paycheck. Still, it's up to you to triple-check and confirm with the person who pays you because telling the tax office "I didn't know!" just won't work.

While these amounts are just estimates and everyone's situation varies greatly, they highlight some of the considerations you need to take into account when double-checking your finances.

What should I do?

The best thing you can do is be informed and do the numbers before the end of the financial year. If you feel unsure, talk to someone who knows a bit more about it or a tax professional. The worst thing is arriving at the end of the financial year, getting excited for that sweet, sweet motherlode of a tax break, and fainting because it's actually a debt instead.

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