Help! How much will my HELP debt increase this year?

Help! How much will my HELP debt increase this year?

While student loans – often referred to as Higher Education Loan Program (HELP) debts – previously Higher Education Contribution Scheme (HECS) – are interest free, these loans are instead ‘indexed’ in line with changes to the consumer price index (CPI). In simple terms, student loans adjust each year on 1 June in line with inflation.

For the past 10 years, the indexation rate has hovered around 1-2%, with only 2022 having been an outlier at 3.9%. This year particularly, we have all felt the pinch in our wallet that little bit more.

On Wednesday, 26th April 2023, the Australian Bureau of Statistics (ABS) officially announced that inflation in the 12 months to 31 March 2023 now sits at 7%. This has eased from its 31-year peak of 7.8% at the end of 2022.

What does this mean for my student loan?

This means for the average Australian student loan of $22,636, an extra $1,585 would be added to the loan on the 1 June 2023. A $10,000 student loan would have an extra $700, whilst a $40,000 student loan would have an extra $2,800 added.

Do my repayments increase?

Importantly, the announcement doesn’t necessarily mean you will have your compulsory repayment increased come tax time. It will still depend on how much your income is. The general principle still remains the same – the more you’ve earned in the financial year, the higher your repayment will be.

For 2022-23, students are required to begin paying HELP debts at 1% of their repayment income once they earn more than $48,361. Those on an average of say $90,000, pay 6% of their income, whilst those on $141,848 and beyond pay 10 per cent of their income – the highest rate.

Are HELP loan repayments tax deductible?

HELP loan repayments aren’t usually tax deductible. This applies to both compulsory and voluntary repayments. You may however be able to claim deductions for specific expenses relating to your self-education, if they are relevant to earning your income. Keeping all your receipts safely stored away for tax time will ensure that you claim all that you’re entitled to, reduce your repayment income and minimise your compulsory annual repayment amount.

Importantly, if you plan to pay off your total loan balance with a voluntary repayment before indexation is applied, be sure to allow enough time for the payment to be received and processed by the ATO well before 1 June 2023.

Please feel free to contact our office for more information.