Some won’t have to pay off their HECS-HELP debt yet after this change

Some students and graduates with a HECS-HELP debt will get a reprieve from making compulsory repayments this financial year.

That’s because the repayment threshold has been raised, as it is each year.

Last financial year, the threshold kicked in at $48,361, meaning anyone with a student loan earning above that amount was required to make repayments.

But the threshold was raised from July, and people can now earn up to $51,549 before they have to pay the money back.

The Australian Tax Office (ATO) has been sending out emails to let people with student loans know about the changes.

If you have a student loan, here is what you need to know.

What is the HECS-HELP repayment rate?

If you’re earning more than $51,549, then the amount you need to pay back will depend on how much your income is.

The repayment rate is calculated as a percentage of your income and is automatically deducted by employers with each paycheck.

The repayment is different from the indexation rate, which is applied to student loans each year on June 1 by the ATO.

Indexation is calculated in line with inflation and this year was 7.1 per cent.

This year’s high indexation rate caught many students off guard and meant someone with the average national student debt of  $24,770.75 had an extra $1758.72 added to their amount owing.

What’s the new repayment rate?

Here are the new repayment rates, which came into effect from July:

• Below $51,550: Nil
• $51,550 — $59,518: 1.0 per cent
• $59,519 — $63,089: 2.0 per cent
• $63,090 — $66,875: 2.5 per cent
• $66,876 — $70,888: 3.0 per cent
• $70,889 — $75,140: 3.5 per cent
• $75,141 — $79,649: 4.0 per cent
• $79,650 — $84,429: 4.5 per cent
• $84,430 — $89,494: 5.0 per cent
• $89,495 — $94,865: 5.5 per cent
• $94,866 — $100,557: 6.0 per cent
• $100,558 — $106,590: 6.5 per cent
• $106,591 — $112,985: 7.0 per cent
• $112,986 — $119,764: 7.5 per cent
• $119,765 — $126,950: 8.0 per cent
• $126,951 — $134,568: 8.5 per cent
• $134,569 — $142,642: 9.0 per cent
• $142,643 — $151,200: 9.5 per cent
• $151,201 and above: 10 per cent

What’s the catch?

For those people who find themselves now earning under the repayment threshold, this could be seen as good news.

However, not paying your debt off now could mean you end up paying more in the long term because of the indexation that is applied.

While inflation appears to be tracking downward, this year’s hefty 7.1 per cent indexation has highlighted the potential dangers of waiting to pay off your student loan.