Why your HECS debt repayments might not stop when it is paid off

A common mistake made by those with HECS debts means they are still making loan repayments out of their pay packets each week, even when the debts have already been paid off.

By checking a box on a tax file declaration form that requires an employer to automatically withhold repayments from their pay — a common method of paying off the loan — workers are signing up for potentially endless deductions.

That’s because they need to opt out of the arrangement with their employer after the loan has been paid off.

It takes roughly a decade to pay off a HECS debt in Australia, according to ATO data from 2021.

So it’s no surprise that students are not initially thinking about the steps to be taken once the loans are paid off, or even keeping track of their loan balances.

H&R Block Director of Tax Communications Mark Chapman told 7NEWS.com.au: “Setting and forgetting is a very unwise strategy.

“It’s common sense that you should keep an eye on your loan balance, specifically so that you avoid this situation.

“Each year, you should be aware of your current loan balance, your minimum repayments and where your loan balance is headed.”

If you forget, there are two steps you’ll need to take to stop the repayments from being made, and to get back the overpaid sum.

“In the first instance, contact your employer’s payroll department to get your regular repayments stopped,” Chapman said.

The ATO also advises that a “withholding declaration” form can be used to inform an employer that you have repaid your loan in full.

“Then, contact the ATO to get any over-payment repaid,” Chapman said.

“The ATO will ensure that any overpayments are refunded.”

The overpaid sum will be included in the taxpayer’s next tax return.

“Eventually, you’ll arrive where you need to be, but there might be a bit of administrative hassle first,” Chapman said.