Pre 2000 education debts Australia
The History of HECS
In the early 70’s, the Australian government abolished university fees in order to make higher education more accessible to working class Australians. These reforms provided opportunities to citizens who otherwise would not have been able to access a university level tertiary education. Citizens were able to attend university without the burden of tuition and fees, and the education they received allowed them to expand their employment opportunities.
But by the late 80’s, the Australian government slowly started to re-introduce the idea of paying for tertiary study, and so began the Higher Education Contributions Scheme (HECS). The first iteration of the scheme charged university students an upfront fee of $1800, and the government would then pay the rest – allowing students to defer the initial tuition fees and repay their HECS debt through the taxation office once they earned over a certain amount of income.
The function of HECS loans has grown and evolved over the years, by introducing new functions such as different tiers of repayments depending on the perceived value of the degree that the student was working towards. The HECS-HELP scheme has also expanded to include loans and financial aid for students studying certain VET level qualifications.
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How HECS Works Today
Pre-2005 education debt is called HECS, while post-2005 debts are called HECS-HELP.
On receiving a HECS-HELP loan, the student pays no upfront costs to the university. The government pays the tuition amount directly to the university on behalf of the individual, and the individual then makes repayments based on a certain percentage of their income, depending on how much income they earn.
In 2021 alone, there were 2.9 million Australians with an outstanding HELP/HECS debt. Though 64% of Australians have never had any student debt – this is probably largely due to the number of citizens who were able to take advantage of the time when university fees were abolished. Those in the ‘baby boomer’ generation have an average of $930 in outstanding fees, compared to their Gen Y and Gen Z counterparts who hold an average of $16,000-17,250.
But these days, the average Australian has a HECS debt of $23,685 as of 2022 (as opposed to the average in 2012 being only $15,191). Many fall under the average, and many have a looming debt that is much higher. But whether you finished your higher education this year, or twenty years ago – it doesn’t change the fact that the Australian government requires you to repay the debt.
There once used to be discounts for voluntary repayments made on any pre-2005 HECS debts, but this was slowly reduced over the years, and was then eventually abolished all together as of the 1st of January 2017.
Before 2017, overseas earnings were not counted towards HECS repayment income levels either. This meant that Australian citizens living overseas did not have to make contributions to their HECS debt while they were outside of the country. This has changed now, so if you have an outstanding HECS-HELP debt and you live and earn money overseas, it may be a good idea to get in touch with the ATO to avoid any fines or penalties.
The amount you have to repay each year is not based on the amount outstanding on the loan, but on your rate of income. If you earn over the threshold ($48,361 for the 22-23 financial year) you will be required to make a contribution to your loan. The repayment rate starts at only 1% and continues to rise as your taxable income does – maxing out at 10%.
These loans are all interest-free, so you do not incur any further fees if you’re not able or not required to make repayments due to your income level. Even though there is no interest incurred, these outstanding loans are indexed every year by the Consumer Price Index (CPI), so that the debt maintains its real value – so the total you owe may fluctuate because of this.
Can Your Old HECS Debt Be Cancelled?
Since the introduction of the Higher Education Contributions Scheme in 1989, over 2 million people have fully repaid their debts, and over 18,594 loans have been written off due to the death of the loan holder. Unfortunately, this is one of the only times that an education debt is wiped completely without repayments. There are certain schemes and payment plans to help HECS debt holders experiencing financial hardship, but there are very few circumstances in which the government will fully forgive the debt. You may cancel your HELP debt if you meet what the government calls ‘Special Circumstances’.
To meet these special circumstances, you will need to provide supporting documentation within 12 months of your withdrawal date from the unit/s. You will also need to prove that what affected you was:
– beyond your control
– didn’t make the full impact until on or after the census date
– made it not practicable for you to complete the units
The government will not approve your application for cancellation if you had completed the units successfully, or if you withdrew from the units simply because you changed your mind. The special circumstances must have affected your life in a way that made completing the units of study unreasonable.
When a person with outstanding HECS debt passes away, the repayment included on their income tax notice that relates to the period before the death must be paid, but the rest of the outstanding debt will be wiped and forgiven. HECS debts do not pass on to next of kin or the family of the deceased, and the remainder is cancelled once a loan-holder passes.
So even if you were not around in the times of free university education in Australia, there are still programs in place to help you obtain a higher level of education if you so wish to get it. For anyone who completed their studies pre-2005, things may have changed when it comes to your obligations and status of your outstanding education debts. But if you’re struggling financially, there are avenues to take that will help ease the burden of your education debt, but the fact remains that there are very few circumstances that will get you out of repaying your HECS loan.