The yearly cost of student (HECS) loans is likely to reach a figure of $11.1 billion by the year 2025. The number of new loan applications is rising and, according to a report published by the Parliamentary Budget Office, the nominal value of the Higher Education Loans Scheme will likely hit $185.2 billion by the year 2026.

This is partly because of the changes brought about by the previous government to the university sector. The government has cut funding to universities and has allowed them to list their own fees, passing on the cost of higher fees to students and their families. These reforms will, however, increase Australia’s debt and make the whole HECS system very unstable.

What are Income-Driven Repayment Plans?

Income-driven repayment plans are loan repayment plans for federal student borrowers. Rising university fees have increased student debt and the demand for flexible loan repayment options like income contingent payment plans.

Students in Australia can choose from 5 different loan schemes under the government administered Higher Education Loan Programme. Those eligible for this scheme don’t have to pay full tuition fees, but lower student contribution amounts. Students may also be given state-subsidised placement in certain universities, based on their individual circumstances. Once enrolled in the HELP system, borrowers are given a payment reference number so that they can keep track of their payments and amounts due.

How Are Repayments Calculated?

Under the HELP scheme, your repayments are based on the income you earn. A certain percentage of your income will go towards the repayment of your student loan. You won’t be charged any interest on your HELP debt and you won’t have to make payments until you earn more than $54,869 a year. If you can’t afford to make any payments you will have to write to the Australian Tax Office to request them to temporarily postpone your student loan repayments.

You have to give the ATO valid reasons to support your application for a deferral. You will also have to provide all your salary slips and bank statements to show them your income and expenditure. Special circumstances like illnesses are also taken into consideration to approve applications for a deferral.’

Is-Your-Business-In-Financial-Distress

What are the Pros and Cons of Income Driven Payment Plans?

One of the biggest concerns for students using the HELP scheme is the high amount of debt they accrue by the time they finish graduating. The other problem is that the government has already lost more than $6 billion from students who aren’t able to secure jobs that pay more than $54,000 a year.

Moreover, some students don’t end up repaying the borrowed amount when they move overseas to work.

According to research studies carried out by the Grattans Institute, students who pursue higher studies are more likely to have better financial stability in the long run than those who’ve only completed Year 12, even after loan repayment amounts are taken into consideration. Moreover, the education sector generates revenue of almost $24 billion a year, making it a very lucrative business in the nation.

To sum it all up income-driven repayment plans help you get the career you’ve always wanted. You just have to make sure you understand your responsibilities as a student borrower before you sign the dotted line.

For more information on personal insolvency, check out our personal insolvency page here.

Topics: Personal Insolvency, Debt Agreements, Personal Debt, Debt Management Plans

How Can We Assist You Today?

Business Debt Icon Business
Personal Debt Icon Personal
Please select an assistance option to continue.

Types Of Unsecured Debts

Credit Card Icon Credit/Store Cards
Personal Loan Icon Personal Loan
Pay Day Loan Icon Pay Day Loan
Tax Debt Icon Tax Debt
Disconnected Utilities Icon Utility Bill
Other Debts Icon Other
Please select at least one type of unsecured debt.

Your Business Structure

Sole Trader Icon Sole Trader
Partnership Icon Partnership
Company Icon Pty Ltd Company
Tax Debt Icon Trust
Please select at business structure to continue.

Unsecured Debt Amount

$8,000
$1,000
$100,000+

Business Debt Amount

$100,000
$10,000
$1,000,000+

Take Back Control Today!

First Name

Last Name

Email

Phone Number

Phone number must be 10-digits long and begin with a 0. (e.g. 04 1234 5678)

Post Code

Post code must be 4-digits long (e.g. 4567)

Some of your details appear incorrect.
Please update the highlighted fields and re-submit.

Congratulations

You’ve taken the first step to steer your business back to viability

Let’s keep the momentum going, take the second step by linking your Xero account now.

Congratulations

You've taken the first step to becoming debt free

Let's keep the momentum going, take the second step now and complete the assessment form.

By submitting this form you acknowledge that you have read and accept our Privacy Policy