HELP debt and mortgages
How rising interest rates affect your mortgage
July 14, 2022
RBA August 2022 Meeting
August 2, 2022
What does my mortgage have to do with a HELP debt?
What is the Higher Education Loan Program (HELP)?
The HELP programme is a loan programme run by the federal government to help students pay for their higher education. This loan programme is designed to assist students to study and put off paying for school until they reach a taxable income threshold . Among them are the following programs:
- Higher Education Loan Program (HELP)
- VET Student Loan (VSL)
- Student Financial Supplement Scheme (SFSS)
- Student Start-up Loan (SSL)
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
- Trade Support Loan (TSL)
Study and training loan repayment thresholds and rates
In 2022–2023, all loans for education and training will be covered by the same rates and thresholds.
The order in which you have to pay back your student and training loans is:
- HELP
- VSL
- SFSS
- SSL
- ABSTUDY SSL
- TSL
Note repayment income (RI) is taxable income plus any total net investment loss (which includes net rental losses), total reportable fringe benefit amounts, reportable super contributions, and exempt foreign employment income.
2022 – 2023 repayment income thresholds and rates
| Repayment income (RI) | Repayment rate |
| Below $48,361 | Nil |
| $48,361 – $55,836 | 1.0% |
| $55,837 – $59,186 | 2.0% |
| $59,187 – $62,738 | 2.5% |
| $62,739 – $66,502 | 3.0% |
| $66,503 – $70,492 | 3.5% |
| $70,493 – $74,722 | 4.0% |
| $74,723 – $79,206 | 4.5% |
| $79,207 – $83,958 | 5.0% |
| $83,959 – $88,996 | 5.5% |
| $88,997 – $94,336 | 6.0% |
| $94,337 – $99,996 | 6.5% |
| $99,997 – $105,996 | 7.0% |
| $105,997 – $112,355 | 7.5% |
| $112,356 – $119,097 | 8.0% |
| $119,098 – $126,243 | 8.5% |
| $126,244 – $133,818 | 9.0% |
| $133,819 – $141,847 | 9.5% |
| $141,848 and above | 10% |
How much interest will I be charged for my HELP debt?
Your HELP debt does not accrue interest. Instead, on June 1 of each year, an indexation rate is added to your debt. The cost of living is used to change this indexation rate.
Since the cost of living has gone up in 2022, the indexation rate has gone up a lot from previous years and is now the highest it has been in 10 years, increasing from 0.6% in 2021 to 3.9% in 2022. See below for information about the past.
| Indexation rate table | |
| Year | Indexation rate |
| 2022 | 3.9% |
| 2021 | 0.6% |
| 2020 | 1.8% |
| 2019 | 1.8% |
| 2018 | 1.9% |
| 2017 | 1.5% |
| 2016 | 1.5% |
| 2015 | 2.1% |
| 2014 | 2.6% |
| 2013 | 2.0% |
How does the indexation rate impact my HELP debt?
Take Tom for example. He has finished university with a HELP debt balance of $50,000. He has been working full time for two years now and is earning a salary of $64,000 before tax.
He is now above the repayment threshold and due to his income has to pay back 3% of his taxable income or $1,920.
Let’s assume Tom is planning to make that payment at 30 Jun 2022. The balance of his HELP debt at 1 June is $50,000 – when you apply the indexation rate of 3.9%. $1,950 is HELP interest will be applied to the balance of his loan. Updated balance of $51,950.
This shows that with the current indexation rate, Tom is making less repayments compared to what is being charged to his loan and is accruing a higher debt.
Tom would need to look at home to make additional repayments to get on top of that balance.
How does this impact your borrowing capacity for a mortgage?
If a person has a HELP debt and their taxable income goes up, it makes it harder for them to get a mortgage loan.
Take the case of a taxable income of $64,000. A person who wants to borrow money to buy their first home (assuming no other debts). Without a HELP debt, they can borrow about $450,000, but with a HELP debt, they can only borrow $425,000.
If the income that was taxed in the example was raised to $120,000. A person who wants to borrow money to buy their first home. Without a HELP debt, they could borrow around $800,000, but with a HELP debt, they can only borrow $675,000.
As a person’s taxable income goes up, so does the repayment threshold. This makes it harder for people with higher incomes and a HELP balance to borrow money. Reducing their ability to borrow money, especially for first home buyers.
