Here's how the new HECS repayment thresholds could affect you

From next month, many more uni grads will be forced to start paying back their debt much sooner than expected.

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From July 1st the repayment threshold for HECS-HELP debts will drop to $45,881 before tax. This is the second time that the threshold has dropped within two years from $55,814 for the 2017/18 financial year to $51,957 in 2018/19.

Those in the lowest income bracket ($44,999-$51,957) will be required to pay back one per cent of their income. If that income is $45,000 a year it works out to be roughly $8.60 a week.

This percentage rises by one per cent for every income bracket increase, capping at a maximum of 10 per cent income repayment for those earning over $131,989 annually.

It’s predicted that the threshold reduction will save the government $345.7 million dollars until 2020-21.

In the run up to the new financial year, the ATO have been sending out friendly reminders of the changes to predictably disgruntled reactions.

How will this affect me?

As pointed out, many minimum wage jobs will now push uni grads into a pay bracket that qualifies for repayment.

For example, the full-time minimum wage for a level five retail assistant works out to be $45,292 annually.

It’s also important to remember that people are required to pay back their HECS debt as soon as they cross the threshold, even if still enrolled in study.

The impact will be felt most acutely by graduates who have high course fees and low wages for an entry-level job in a relevant industry. An example of this is a job in pharmacy; which, according to PayScale, can be as low as $46,000 a year.

At the same time, the government is lowering the HELP repayment threshold, they are also increasing the amount that students can borrow.

From the start of the new financial year, medicine, dentistry and veterinary science courses will see an 15% increase in debt limit from $133,552 to $150,000.

All other course debt limits will remain capped at $104,440.

While all HECS loans are interest free, they will be indexed annually to be brought in line with the cost of living.

Also, you can’t dodge HECS repayments by moving overseas - that loophole was closed back in 2016.

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By Velvet Winter

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