INTHEBLACK June 2026 - Magazine - Page 38
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38 INTHEBLACK June 2026
consequences. Lenders factor HECS-HELP
repayments into borrowing capacity
assessments because the compulsory
repayment reduces disposable income,
he argues. “Repayment income is broader than
many people realise. It includes taxable income
but can also include items such as reportable
fringe benefits, reportable superannuation
contributions, net investment losses and
certain tax-free income,” Mark Chapman says.
This environment has also shifted thinking
around voluntary repayments. “Historically,
voluntary repayments were relatively
uncommon because HECS-HELP debts
do not attract interest in the conventional
sense and there were repayment discounts,”
he says. “But periods of higher inflation
changed that conversation.”
The 20 per cent reduction in 2025 further
altered behaviour: some borrowers deferred
repayments in anticipation of the cut, while
others used the change as an opportunity to
reassess broader financial strategies, including
mortgage planning and savings goals.
Mark Chapman notes that repayment
decisions should be weighed against other
financial priorities, particularly when
indexation or policy changes occur. “In many
cases, directing additional funds toward
higher-interest debt or long-term investments
may make more sense than accelerating
HECS-HELP repayments. But the calculus
can change when indexation rises or when
government policy adjustments occur.”
GLOBAL STUDENT SCHEMES
While Australians might be feeling the
pinch, St John says that New Zealand’s
alternative student loan scheme is far
more punitive and features a repayment
threshold of just NZ$24,128 — less than
half of Australia’s recently restored A$67,000
threshold. Once graduates earn above the
low threshold, a fixed portion of their income
is automatically taken in loan repayments.
“It is incredibly harsh for low-income
people and is effectively like having an extra
12 per cent on your tax rate,” she says.
Many students are also ineligible for a student
allowance because their parents earn over
a low threshold, and so many students are
borrowing for their living costs as well as fees.
Although the student loans do not attract
interest while the graduate remains in
New Zealand, St John argues it has “allowed
the government to push more debt onto
students” and can even benefit higher-income
families as it allows them to take an interest-free
loan while only repaying the original amount.
Across the globe, student loan systems vary
widely. Bruce Chapman says most countries
in Asia, North America and South America
use systems where graduates repay fixed loan
amounts regardless of their income level.
Unlike HECS-HELP-style schemes, these
loans do not protect borrowers when earnings
are low.
“The most important point about
HECS-HELP is that if you do not have
the money and you have got a debt, you do
not have to pay,” he says. “That is
extremely important.”
In Malaysia and Hong Kong, systems
tend to combine public subsidies with loan
schemes or scholarships, but repayment
conditions are often less flexible than
in Australia. In many cases, repayment
begins shortly after graduation, regardless
of income level, which can also tighten
financial pressure in the early years of
working life.
In contrast, the principle behind Australia’s
system is to preserve access through deferred
fees, while ensuring that graduates who
succeed in the labour market repay the
cost over time, says Bruce Chapman.
“I will be honest — I was not sure it
was the right approach at the start, but
it has ended up working reasonably well
in practice. Now, the course prices just
need to be fixed.” ■
