The HECS-HELP scheme is designed to help eligible students to pay for their education with loans and discounts. HECS debt accumulated during this time is different to other types of debt, and repayments are based on your income rather than the amount you have left to pay. Ultimately, the debt is cleared upon death.
In Australia, the threshold for making repayments is $54,869. If you earn less than this amount, you will not be obliged to make repayments. If you earn over this amount, based on your income assessment, you will have to pay back a percentage of your wage.
There are no interest rates applied to the HECS loans, other than adjustments made to meet the rate of inflation. Banks and lending companies also do not view this kind of debt as a ‘loan’, and so it will have little effect on your credit rating. The debt will not follow you oversees either.
At the time of your death, your trustee will file any outstanding tax returns, and if the earning’s threshold is reached then they will be obliged to make payments out of your estate for that year/ After this payment is made, the rest of the debt is written off. Neither your family or trustee will be liable to pay the rest.
To emphasise, HECS-HELP debt will be written off upon your death.
The cost of higher education on the tax payer is increasing. Funding for Commonwealth-supported places has risen by up to 56% since 2009. The Australian government may make changes to the terms of HECS loans in the near future.
One of the proposed changes is to remove the complete write-off of HECS debt at death for those who’s estate is worth more than $100,000. Another, is to assess the repayments based on household income rather than individual income.
The topic is highly controversial, and there is no way to know how the rules will change. For now, HECS-HELP debt is still written off upon death, but in the future this could be different.
Debt Negotiators stay up-to-date with the latest changes to legislation, and can offer impartial advice about HECS loans and other forms of credit. Contact us today to speak to a financial expert.