Most people will pay less under the new HELP thresholds

The Federal Government has introduced new repayment thresholds for people with HELP debt. The new thresholds, which took effect from July 1, mean that most people with HELP debt will pay back less each year, and the Government will recoup less debt each year than they would have under the previous system.

The old and new repayment thresholds are compared in the chart below. The new thresholds start earlier at lower repayment rates, and end with higher repayment rates if you earn above about $110,000 a year. There are now 18 repayment levels between 1 and 10 per cent, up from 10 last year. For some, the extra ‘steps’ will reduce the shock of moving to a new repayment rate.¹ HELP repayment rates are taxed on your whole income. Under the new system, if you earn $75,000 you will pay 4 per cent on your entire income: $3,000. If your income increases to $75,500, you’ll move to a higher repayment rate, 4.5%, and pay $3,398.

The biggest change to repayment rates is the introduction of a new lowest threshold at $45,881. If you are on this income you will pay 1 per cent of your annual income: about $459 per year. This change will affect about 130,000 people with HELP debt on incomes between $46,000-$52,000 – two-thirds of whom are working in jobs that often don’t require a university degree.

Higher repayment amounts at the top end of the scale mean the 75,000 HELP-debtors with incomes higher than $113,000 will repay more each year. The chart above shows that people on $113,000 will repay $565 a year more, and people on $150,000 will repay $3,000 a year more.

But most of the half-a-million HELP-debtors who earn between $58,000 and $95,000 will pay less each year. This group tends to be young – as are most people with a current HELP debt – and working full-time in professional jobs. About 140,000 women and 80,000 men in professional jobs will have to repay less of their HELP debt under the new thresholds. In total, more than half of the professionally-employed group will pay less this year.

About half of the people who do not have professional employment – those working in trades, services, admin or as labourers – will have to repay less each year. A quarter will pay the same.

As the next chart shows, most people with a HELP debt still fall below the new threshold. This group is mostly made up of people working part-time, and includes people who are still studying.

Because far more HELP-debtors will pay back less each year under the new system than will pay more, the Federal Government is a loser. It will recoup slightly less each year — about $50 million less out of $2.7 billion. Slower repayments from the middle income group means higher administrative costs and less debt expected to be repaid, and less public money for alternative programs.