Australia is the lucky country with the HECS-HELP scheme providing our local students with government-backed loans, but what happens to when you pass away?
This is a different type of debt than just about any debt out there. This is because it isn’t issued by a typical bank or financial provider, unlike all others. Not only that, but it’s based upon your actual current income, not what’s left on the loan when you die.
Often, your HECS-HELP Debt becomes $0 when you die. You don’t owe anything and your family members won’t be chased by the government for repayments.
That’s one very fortunate situation to be in.
Current HECS and HELP loans
When you die, the Trustee for your Estate will file any outstanding tax returns. Unfortunately, if the earnings for that year is reached then they will need to make payments out of your estate for that year only.
That payment will be made and all future years will be written off. That is – the case is closed and everyone moves on, with no one liable to pick up the payments.
So you might be liable for a little bit to pay there. The current threshold for making those repayments is $54,869. If you die when living overseas, you might get an exception for repayments, even if you are still alive.
Changes might be coming
The Australian government has proposed a change to remove the debt write-off rules currently in place. This is because they believe that the cost of higher education continues to rise too high.
Basically, if your estate is worth more than $100,000, then what they’re saying is that you might have to pay back your HECS-HELP debt. This is a proposed change and nothing official has come from it yet.
It’s a very controversial topic and personally, we’re not a fan of it. We believe that at such a sensitive time, the Australian Government shouldn’t be reaching into your pockets for money after you’ve passed away. You’ve already paid a fortune in taxes.
We’re a big fan of the debt-free lifestyle here, hence the creation of this site. Certainly, we’re against taking out most forms of debt, especially payday loans.
Now, if there’s one debt that we can advocate you take out, it’s actually HECS-HELP debt. This is because the advantages for your career are significant and currently, if you do die, then the debt will be written off at the time of death. It’s unlike pretty much any other type of debt.
In other countries, it’s a different situation where your friends and family will be chased. But we’re in Australia and we’re a lucky country.