Student loan repayments from overseas: An overview

Time flies. One moment you’re saying tearful goodbyes to your schoolmates as you pack your bags for university. Then, before you even know it, you’re receiving that joyous letter from the Australian government, informing you that – congratulations! – it’s time to start repaying your HECS-HELP loan.

Once you hit that income threshold – AUD 45,881 in 2019-20 – you have to start paying back the money that got you through uni.

If you’ve moved overseas since then, or are planning to, you still have the same student loan repayment obligations as someone living in Australia. However, because you’re living abroad, the process is a little bit different, and the way you make the payment may change too.

That’s why we’ve put together this guide to how to make student loan overseas repayments, without losing out when you send your money back to Australia.

University is expensive. Don’t let it cost more than it should

First off, let’s recap the basics.

If you’ve been through university in Australia, you may well have taken a government student loan to help you through it. This sort of loan is frequently called a HECS, but more accurately it’s “HECS-HELP”.

That term technically refers to just one of the various sorts of loan that the government offers: other ones, like OS-HELP and FEE-HELP, fall under the HELP banner as well, and you have to repay them in exactly the same way as HECS-HELP. HELP stands for Higher Education Loan Programme, by the way.

You can check how much you owe in student loans through myGov or myUniAssist¹.

The total figure that you owe is likely to look pretty startling, but thankfully you don’t have to pay it back quickly. And even better, the amount you pay back is tied to your income, so it should only ever be an affordable fraction of your salary.

For the 2019-20 income year, you don’t have to pay back your loan if you earn less than AUD 45,881. If you earn just above that, you’ll have to pay 1% of your income in student loan repayments, and that percentage increases incrementally with your income. The maximum percentage is 10%, which you’ll have to pay above earnings of AUD 145,573 or more².

That’s the compulsory repayment, which the Australian Taxation Office (ATO) calculates for you once a year when you do your tax return. You’re also allowed to make voluntary repayments, if you feel like it – they’ll gladly accept such payments at any time².

What happens to my student debt if I move abroad?

Sad though it may seem, fleeing the country isn’t an effective way to get out of repaying your student debt. In fact, you’ll have to pay back just as much as if you’d stayed in Australia.

You’ll need to keep the ATO informed: first of all that you’re moving abroad, and secondly of your annual worldwide income. Let them know that every year by 31 October, and they’ll calculate what you have to repay just like if you were still living in Australia³.

Let them know your plans before you move, so that they can keep in contact with you. If you’ve already moved, inform them asap.

How do you do all this? Either online through myGov’s assessment form, or via an Australian registered tax agent (in which case they can file later than 31 October)⁴.

Hidden fees when sending money abroad

After you’ve declared your income to the ATO, they’ll key the numbers into their magical student loan repayment calculator, and get back to you with the amount you need to pay, as well as a due date to pay it by. Then it’s up to you to make the transfer.

Here’s another tricky moment, though. As you may well have already discovered if you live abroad or are planning to, international money transfers can get pretty expensive if you use the wrong provider. And of course, the more you send, the more you stand to lose if your transfer provider offers you a bad exchange rate.

That’s because banks and specialist transfer services can set their own exchange rate. What they usually do is take the mid-market exchange rate, also known as the interbank rate, and mark it up, adding a certain percentage on top that means they can effectively hold on to a bit more of your money while they make the transfer.

It’s through marking up the exchange rate that some providers can boast of offering “no fees” or “zero commission” – in fact, there is a fee, but it’s just hidden from view in the exchange rate.

You therefore need to take great care to know the full cost of the transfer before you make it. Always try and find out what exchange rate will be used for your transfer: you can compare it to an online currency converter on Google, XE or Wise to see how it squares up against the mid-market rate.

How to minimise your costs when making student loan repayments

When it comes to repaying your student loan from abroad, then, you should consider your options carefully, especially if it’s a substantial amount. If you have enough money in an Australian account, it could be worth simply making a domestic transfer from that account. Although of course, if you do that regularly – and even once a year counts as regularly – you’re still going to need to be sending some money back to Australia once in a while, to keep your account looking healthy.

Another option you have, of course, is using your local bank in your new home abroad. Most banks do have the capacity to send money overseas. However, you should be careful to find out the full cost of this before you do it. International transfers from banks often have bad exchange rates as well as fixed fees, and they can often take a while to come through.

There may also be unspecified additional fees as your money makes its way through the complex SWIFT network. SWIFT is the system through which banks handle international payments, and it may involve a chain of different banks – all of which might charge you something for the service. It can be really difficult to predict exactly how much a transfer like this will actually cost.

What’s the alternative option? Finding an international transfer service that won’t leave you out of pocket. That means one that offers as close as possible to the real mid-market exchange rate, and doesn’t charge hefty fees on top. There’ll probably still be a fee to pay, but if you get a good exchange rate, you shouldn’t end up paying more than you absolutely have to.

Wise: A simple way to send money abroad

One option you have is Wise, which always uses the mid-market rate, and clearly states the low percentage fee it charges from the very beginning of the process. Whether you’re sending money straight to the ATO or to your bank account back in Australia – or anywhere else, for that matter – this could be a great way to minimise the cost of the transfer.

Even better, you can get a borderless account, which lets you hold money in 40+ international currencies and even gives you virtual account details in AUD, NZD, USD, GBP and EUR. Anyone spending time abroad, whether permanently or temporarily, could benefit from the convenience of a multi-currency account – and there are no monthly costs to worry about at all. Australian customers even get a debit Mastercard for their borderless account.

However you choose to repay your student loan from overseas, do try and make sure you don’t end up losing out on the transaction. Education is expensive enough, without having to pay the banks as well.

Sources accurate as of 4 Dec 2019