31 Mar What I wish I knew earlier about my student HELP debt
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I was a bit cocky and I didn’t always work as hard as I should. Soon enough, I was on track to fail some of my classes – so I decided to pull the pin.
What I failed to recognise was how much it would cost me. As I withdrew after the census date, I had to pay for the courses I never completed.
It’s just one of the many mistakes you can make when you don’t understand how the student loan system works.
If you’re starting at university or TAFE, or wondering about your student debt, here are some important things to keep in mind.
What is HELP debt and how does it work?
The Higher Education Loan Program (HELP) is a loan provided by the Australian Government to help cover the cost of your university fees. You might know the scheme by its former name, HECS.
Compared to student loan programs overseas, the HELP scheme is one of the best available, says financial educator and author Lacey Filipich.
«There’s a lot of media coverage in the US about people getting into huge amounts of debt after going to school and then really struggling to pay that off,» Ms Filipich explains.
«The scheme in Australia is designed to be one of the most accessible and one of the most reasonable loans you can get.
«If students are thinking about studying, and HELP is the only way they could do that, it’s a great option to consider.»
How does HELP debt get repaid?
When you start university, paying for your student loan may seem like a distant problem. But you do need to pay it back – and the repayments are automatically deducted from your income.
«There is a certain amount of income you have to earn per year and once that happens, you have to start paying that debt back. It’s around $47,000 a year at the moment,» Ms Filipich says.
«And that goes up to a maximum of 10 per cent of your income [for people earning $137,898 and above], which will just keep paying it off automatically through your pay.»
Paying back your HELP or HECS student debt, explained
In other words, the loan will only increase in line with inflation. It’s a great deal compared to other loans that charge interest.
«But it is still accumulating, so if it takes you 10 years to start paying back that debt, you’ll be paying more than what you originally borrowed.»
Why switching courses can be expensive
The freedom to switch pathways once you start studying is wonderful, but it can also add significantly to your final bill.
Jackson, 25, moved to Melbourne to study aerospace engineering when he was 17. After a year, he realised he didn’t really like it.
«After coming back to WA, I ended up spending two years studying other courses I had no real interest in, just because I felt pressured to be at university,» says Jackson, who asked to withhold his surname for privacy.
«In the end I spent six years at uni to complete a three-year course and have a HELP debt way higher than what I needed.»
With roughly $60,000 of HELP debt left to pay, Jackson says he wishes someone had told him to take some time to decide what to do rather than just «pick something and finish it».
What you can’t borrow for
Discounts on your fees are available if you make up-front payments. It can be a good way to save money down the track, Ms Filipich says.
«Maybe you get some work on your holidays and you’re able to save extra money and you could put that towards your HELP debt while you’re studying and you’ll get that discount,» she says.
Ms Filipich says it’s also a good idea to take time up-front to decide a particular field of study is right for you.
«There are great people to speak to at universities that can help you with those discussions and talking to friends and family members about their experiences and how they’ve approached it can help before you sign up,» she explains.
«It’s a pretty low-risk experience of debt for most people because you’re probably going to be creating some value that’s going to hopefully help you earn more in the future.»