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Hewison Insights

Should I repay my HECS/HELP debt with my extra savings?

Simon Curtain
Partner/Private Client Adviser
7 Jun 2012

One of the most common queries I receive from Young Wealth Accumulators is whether or not they should repay their HECS / HELP debt?

The short answer is: no

While the Higher Education Contributions Scheme (HECS) has been changed to a more palatable acronym; HELP (Higher Education Loan Program), the concept is still the same – the Government lends you money to fund your University education and you repay that money back over time.

The beauty of HELP is that the loan is interest free, so there’s no rush to pay it off.

Of course, the loan amount is adjusted each year with inflation, in line with everything else, so the real value of the loan remains the same.

It is important to note that there are bonuses awarded if you make voluntary repayments to the HELP loan. While the bonuses used to be quite attractive (previously you would have received a 20 per cent bonus if you made a voluntary payment of $500 or more to the loan), over the years the bonus has been whittled down so that you now only receive a 5 per cent bonus on voluntary payments over $500.

If you’re able to accumulate some extra savings, you’d be better off putting your money towards other things like reducing credit card debt or saving for a home.

Fear not though, the loan will repay itself over time as you start earning income. Once you start earning over $49,000 per annum, 4 per cent of your income goes toward payment of the loan. This percentage increases the more you earn until you are repaying the maximum rate of 8 per cent each year when you start earning over $91,000 per annum.

So while your HELP debt can run into the tens of thousands of dollars, since it is an interest free loan, there is no real incentive to pay it off early. Put it on the back-burner and let it sort itself out over time.






Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.