What happens to my HECS Debt when I Die?

If you’re a student striving for higher education in Australia, the term “HECS loan” has likely crossed your path. This acronym stands for the Higher Education Contribution Scheme. It is a financial arrangement started in 1989. While those who studied at a university before 1989 might find themselves exempt from this system, the majority of us have or have had a HECS loan at some point in our educational journey.

Navigating HECS Debt After Dying

The question that often arises is: How do HECS loans operate, and what transpires after your educational pursuits come to a close?

Repayment of HECS loans is linked to your income. The process starts when your earnings go over a certain amount. When your income for that financial year exceeds this threshold your employer makes the compulsory repayments on your behalf. These repayments are seamlessly deducted from your salary, ensuring a streamlined process.

What happens when you die with a HECS debt?

What happens when you die with a HECS debt? What happens when you are no longer present to manage your HECS loan?

At your death, the responsibility of managing your assets and liabilities, including your HECS loan, falls to your executors in your Will.

You, the persons holding your POAs and then, at death, executors ensure that your compulsory repayments remain up-to-date. Your accountant prepares the outstanding tax returns for each relevant tax year.

At death, HECS has many rules

HECS loans occupy a singular piece within a broader jigsaw puzzle. Similar mechanisms extend to various other Government HELP loans, encompassing FEE-HELP, VET FEE-HELP, OS-HELP, SA-HELP, and VET Student Loan Debts.

The HECS loan has entrenched itself as an integral element within the Australian higher education landscape. As you navigate the path towards realising your academic aspirations, bear in mind that HECS loans function as a support system, fostering financial flexibility. Keep a vigilant eye on your income and remain well-versed in repayment thresholds. Ensure the seamless transition from the realm of student life to the arena of gainful employment.

For further help on HECS loans, speak to your accountant, and financial planner and use the myGov portal.

The Executor’s Role when you die with a HEC Debt

Your executor carries on with your financial affairs. The executor manages your assets and liabilities. This is according to your wishes in your 3-Generation Testamentary Trust Will.

Compulsory Repayments of HECS when you are dead

If you have not done so, then the executor shoulders the responsibility of ensuring that repayments are current until the day of your death. These repayments hinge upon your income. This falls under the stewardship of your employer, who deducts HEC payments directly from your salary.

Outstanding repayments are coordinated between your executor, your employer, and the Australian Taxation Office (ATO). This may include your accountant preparing outstanding tax returns.

Cancellation of Remaining HECS Debt at death

Once you are up-to-date then the rest of the HECS balance is extinguished. This is good news for your beneficiaries.

At the time of your death, your executor files any outstanding tax returns. If your earning threshold is reached then the executor makes payments out of your estate. This is for that financial year. But, after this payment is made, the rest of the debt is written off. Neither your family nor your executor is liable for the rest of the HEC debt – it is written off.