HECS/HELP Debt and your Family Law Property Settlement

Understanding how your finances will be divided after a divorce or separation can be complex. In Australia, where pursuing higher education is common, many couples grapple with how HECS/HELP debt is treated during a property settlement.

What is HECS/HELP?

HECS/HELP (Higher Education Contribution Scheme/Higher Education Loan Program) is a government initiative that assists eligible Australian students in paying for their tertiary education. This assistance comes in the form of a loan, that is repaid gradually through the tax system once an individual’s income exceeds a certain threshold. While the scheme enables many to access higher education, it often results in a significant debt that can linger for years.

Increasingly, separating couples are bringing substantial HECS/HELP debts into their relationship or accumulating them during their time together. This raises the question of how these debts are treated within the framework of family law property settlements.

HECS/HELP and Family Law Property Settlements

The Family Law Act 1975 governs the division of property after a couple separates and aims for a just and equitable outcome for both parties. Generally, in reaching such an outcome:

• all assets and liabilities, whether held jointly or individually are considered
• the financial and non-financial contributions made to the relationship by each party are relevant – non-financial contributions include domestic contributions such as childcare, performing household duties and providing emotional support
• the future needs of each party are taken into consideration

The existence of a HECS/HELP debt is relevant during a property settlement. However, whether it is included or excluded from the overall property pool and how it impacts the final property settlement depends on various factors.

How is a HECS/HELP Debt Viewed in a Property Settlement?

HECS/HELP loans are unique in a family law property settlement. Unlike many other liabilities, the obligation to repay a HECS/HELP loan does not arise until the party owing the debt earns above a certain threshold. Further, a HECS/HELP loan can be viewed as substantially increasing one party’s future earning capacity.

Generally, HECS/HELP debt can be seen as a:

• joint liability to be included in the property pool
• personal liability to be excluded from the property pool

Factors in Assessing the Role of HECS/HELP Debt in a Property Settlement

There is no one-size-fits-all approach to treating HECS/HELP debt after separation, and each case must be assessed on its merits and the specific circumstances. Some of the factors that may be used to determine how HECS/HELP debt is treated in a family law property settlement include:

• Who incurred the debt/when was the debt incurred? Was it one party before the relationship, or was it incurred during the relationship?
• Have the studies been completed? Has the party who incurred the debt completed their studies or are they ongoing?
• Was there a mutual understanding or agreement about the study and debt? Did both parties agree on the course of study and how the debt would be managed?
• How has the qualification benefited the relationship? Has the qualification achieved through the debt led to a higher household income or improved lifestyle for the family? Alternatively, is one party likely to benefit exclusively from the qualifications post-separation?
• How have repayments been managed? Has one or both parties contributed to repaying the debt? Have additional repayments been made beyond the mandatory repayments from income? If both parties have a HECS/HELP debt has (only) one party’s debt been paid off or substantially paid off? Will the debt actually need to be repaid?
• How is the qualification being utilised? Is the party who accrued the debt using or likely to use their qualifications through employment?

A joint liability might apply when both parties benefit from the qualification. For example, suppose a couple agree that one partner should study, and the resulting qualification leads to a higher household income benefiting the family unit. In that case, the court may consider the debt a joint liability and divide it between the parties.

Personal liability is more likely to apply when the degree is considered to solely increase the earning capacity of the individual who incurred the debt, and there’s no evidence of a shared benefit. For example, if one party completes (or is likely to complete) their university studies post-separation and the qualification will contribute solely to that party’s earning capacity afterwards, there would be no joint benefit from incurring the debt and the court may deem it a personal liability.

Conclusion

HECS/HELP debt can be a significant consideration in many family law property settlements. While the law aims for a just and equitable outcome, how these debts are treated depends on the specific facts of each case and consideration of a range of factors.

This is general information only, and you should obtain professional advice based on your circumstances. Seeking legal advice can help you navigate your family law property settlement with greater clarity and confidence. If you or someone you know wants more information or needs help or advice, please call +61 2 9283 3344 or email [email protected].