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There has been a massive spike in people making voluntary contributions to their Higher Education Loan Program (HELP) debts before they rise significantly.
Key points:
- Voluntary HELP repayments for this financial year have jumped almost 60 per cent
- ATO warns people need to make HELP repayments by May 25 to beat indexation hike
- There will be a 7.1 per cent jump in indexation on HELP loans from June 1
Voluntary repayments for this financial year up to the end of March 2023 are almost 60 per cent higher than they were in the previous year, according to the Australian Tax Office (ATO).
Teacher James Adam is just one of thousands of people with a HELP debt who has decided to make a voluntary contribution before the 7.1 per cent jump in indexation hit his loan on June 1.
He had about $15,000 to pay off his Bachelor of Primary Education degree, but the indexation jump prompted him to dip into his house deposit savings and pay it off in full.
"I just decided to make one big lump sum and just get it out of the way so I was debt free in terms of looking for a mortgage when I was going to banks," he said.
Mr Adam said it was a relief to see it finally paid off but said not many young people talk to each other about the impact and management of HELP debts despite their rising costs.
"I think it would be interesting to see what people are willing to pay off or how much they're being hurt by it," he said.
"It's only getting harder [on a] day-to-day basis for living expenses, let alone having to pay extra on our uni HELP debts."
Voluntary repayment surge
The major jump in voluntary HELP repayments this financial year comes on the back of 914,645 individuals making voluntary repayments in the 2021-22 financial year.
Between them last financial year, they made more than 5.2 million voluntary repayments that equated to more than $5.9 billion, and wrote off more than $227 million debt.
ATO data shows despite the annual increase in individual voluntary repayments since 2005, it's taking 9.5 years for people to clear their HELP debts in full, and more than 7.7 years to make the first voluntary repayment.
Just days to beat HELP hike
The ATO has advised that people considering making voluntary study and training loan repayments should do so by Thursday, May, 25 if they want the payment to clear prior to June 1 when accounts are indexed.
This will allow ATO systems time to process the repayment via banking systems.
Voluntary payments made after this date may not be processed by ATO systems before June 1 and indexation will be applied to the pre-voluntary payment balance.
People wanting to check the balance of their HELP debt and other student loan liabilities can view their accounts in the ATO's online services via myGov.
It will include all loans and credits, such as voluntary repayments or annual compulsory repayments based on income tax returns, as well as annual indexation.