Thinking | 10 April 2018

Unpaid student loans targeted under proposed Deceased Estate reform

One issue it appears both sides of Parliament can agree on is the need to claw-back Australia’s Higher Education Loan Program (HELP) or HECS debts from graduates.

Labor’s Julian Hill and Liberal’s Ben Morton, have proposed a plan to recover HELP or HECS debts through taking it from graduate’s deceased estates.

In recent times there has been a staggering rise in the levels of debt (from $25 billion to $45 billion over the past four years).

Given that nearly 23 percent of graduates never repay their student debts, alternative means are being sought to curtail what is ultimately loans funded by Australia taxpayers.

At present, payments are required only when a graduate’s income exceeds the threshold. Importantly, when a graduate dies the balance of the debt is in effect cancelled, as these debts are not pursued by the Australian Government or deducted from the balance of assets passing to the deceased’s beneficiaries.

While these proposed legislative changes are still in their infancy, any changes made to student loan repayments may require people to re-assess how they and their families structure their estates, with the proposed changes potentially allowing the Australian Government access to estate assets that were not previously available from deceased estates.

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