The Higher Education Loan Program (HELP) changes that came into force last week will come as a shock to some students with new minimum repayment thresholds and lifetime limits on HELP borrowings.
The reforms to HELP announced in the Mid-Year Economic and Fiscal Outlook back in December 2017 put an end to the ‘eternal student’, enforce more stringent controls on when debts must be repaid and the level of debt that can be accumulated.
New repayment thresholds
Any outstanding HELP debt starts to be repaid once the individual’s income reaches above the minimum level of $44,999 ($55,874 in 2017-18). That is, once your income reaches $45,000, you need to start repaying the HELP debt. New maximum repayment thresholds have also been introduced to speed up debt repayment for higher income earners (the 2017-18 thresholds capped out at 8% once you reached $103,766).
From 1 July 2019, new repayment thresholds apply to all HELP debt:
|Minimum ‘repayment income’||Repayment|
|Up to and including $44,999||0%|
|$45,000 – $51,956||1%|
|$51,957 – $55,073||2%|
|$55,074 – $58,378||2.5%|
|$58,379 – $61,881||3%|
|$61,882 – $65,594||3.5%|
|$65,595 – $69,529||4%|
|$69,530 – $73,701||4.5%|
|$73,702 – $78,123||5%|
|$82,812 – $87,779||6%|
|$87,780 – $93,046||6.5%|
|$93,047 – $98,629||7%|
|$98,630 – $104,547||7.5%|
|$104,548 – $110,820||8%|
|$110,821 – $117,469||8.5%|
|$117,470 – $124,517||9%|
|$124,518 – $131,988||9.5%|
Moving forward thresholds will be tied to CPI rather than average weekly earnings.
The death of the ‘eternal student’ – new lifetime debt caps
New lifetime caps from 1 January 2019 will prevent students who repeat courses or continually enrol in new courses from accumulating public debt with little hope of repaying the debt in their lifetime.
The new loan limits for 2019 are:
- $150,000 – for students undertaking medicine, dentistry and veterinary science courses (as defined in HESA). The new limit is more than the intended FEE-HELP limit for 2019 of $130,552.
- $104,440 – for other students.
The new lifetime limits are not retrospective for HECS-HELP loans and apply to new borrowings only.
The Government estimates that the lifetime caps allow for almost 9 years of full time study as a Commonwealth supported student. However, The University of Sydney estimates the tuition fees for year one domestic medical degree students is $64,600.
How other income might trigger your HELP debt
What’s counted as income?
‘Repayment income’ is taxable income plus any net investment losses reportable fringe benefits, reportable super contributions and exempt foreign employment income. For those working overseas, the HELP debt thresholds include any income you earn overseas even though it may not be taxed in Australia.
Unlike income tax, the repayment income definition is structured in a way that make it difficult to reduce the income counted towards the threshold. You cannot, for example, offset the income against losses from somewhere else such as negatively geared investment property or by making superannuation contributions.
Do you receive a distribution from a family trust?
It is not unusual for students receiving distributions from a family trust to have those distributions limited to avoid triggering repayment of the debt amount. Under these new rules, there will be a lot less to ‘play’ with and anyone with a family trust should review any future distributions to fully understand the impact.