HELP/HECS Debts to increase by 7.1% on 1 June
Important information for those with HELP or HECS debts, and why you might consider paying your debt partially or in full before 1 June 2023.
On 1 June 2023 all Australian study and training loans (including HELP & HECS) will
increase by 7.1%. Each year Study and Training Loans (STL) are
indexed in accordance with the Consumer Price Index (CPI). Given the current level of inflation, indexation on STL will be significantly more than it has been over the past decade. Prior to this year, the highest indexation was
3.9% in 2022. The table below shows the expected increases on a sample of debt amounts:
| Current Debt Amount | Increase on 1 June 2023 |
|---|---|
| $5,000 | $355 |
| $10,000 | $710 |
| $15,000 | $1,065 |
| $20,000 | $1,420 |
| $30,000 | $2,130 |
| $40,000 | $2,840 |
| $50,000 | $3,550 |
Should I pay my debt or invest the cash in a savings account?
According to Canstar, currently the ‘best high interest savings accounts’ are paying up to 5% as an introductory rate (up to 4 months), reverting to 3.75% after the introductory period.
If you currently have surplus cash in your savings account, here’s how much interest you could earn over the next 12 months, should you invest in a high interest account:
| Investment | Interest Earned |
|---|---|
| $5,000 | $208 |
| $10,000 | $417 |
| $15,000 | $625 |
| $20,000 | $833 |
| $30,000 | $1,250 |
| $40,000 | $1,667 |
| $50,000 | $2,083 |
As the indexation rate on your STL is significantly higher than any savings account interest rate; you might be better off putting your surplus cash towards your STL as you may find yourself in a better financial position (see the savings per the table below).
| Available Cash | Saving |
|---|---|
| $5,000 | $147 |
| $10,000 | $293 |
| $15,000 | $440 |
| $20,000 | $587 |
| $30,000 | $880 |
| $40,000 | $1,173 |
| $50,000 | $1,467 |
Please remember that once you make a payment to your STL, that cash is no longer available to you.
How much will I repay over the next financial year?
Once an individual’s repayment income (taxable income + investment loss + reportable fringe benefits + reportable super + exempt foreign employment income) exceeds $48,361 they are required to begin repaying their study and training loans. This is a tiered repayment scale from 1% to 10% of repayment income.
| Repayment Income | Repayment % | FY24* Repayments |
|---|---|---|
| Below $48,361 | Nil | Nil |
| $50,000 | 1% | $500 |
| $65,000 | 3% | $1,950 |
| $80,000 | 5% | $4,000 |
| $100,000 | 7% | $7,000 |
| $120,000 | 9% | $10,200 |
| $141,848 | 10% | $14,185 |
* We have used the 2023 repayment tiers as 2024 are yet to be published.
Remember, once your STL is repaid, your employer will no longer be required to withhold the additional amount for repayment from your pay each pay period (you will need to notify your employer of this). This may see your take home (net) pay increase.
If you would like to know the balance of your STL, or to obtain a payment slip, you can check this online through your MyGov account or contact us. This is general information only, please contact us for further advice to take into account your personal circumstances.
As always, do not hesitate to contact us.
Kind regards,
SaabTeece
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