Death and HECS Debts

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The Minister for Education, Christopher Pyne, recently caused a media stir by floating the idea that the government should recover HECS debts from students who have died.

Tony Abbott quickly announced that he would not be making any changes to the current system. Nevertheless, Christopher Pyne’s suggestion sparked comments by various Members of Parliament who indicated that they are not opposed to collecting study debts from an estate.

The current rules basically provide that a person’s HECS  or HELP debt dies with them. An executor of an estate needs to lodge outstanding tax returns for a deceased person, up to the date of that person’s death. If the notice of assessment includes a compulsory repayment that relates the period before the person’s death, then that repayment must be paid from the person’s estate. The balance of any remaining HECS or HELP debt is then written off by the Australian Government.

If the suggested changes went ahead, then the remaining study debt would not be cancelled but instead would become an unsecured debt of the deceased person’s estate. This means that the remaining HECS debt would rank beside other debts of the estate such as credit card debts or unsecured personal loans. The debts must be repaid from the estate before any remaining assets are distributed to beneficiaries or next of kin.

If there are not enough assets in the estate to repay all the debts, then there are laws regarding how to deal with an insolvent estate. Unless a family member was a guarantor or co-borrower, they will not be responsible for the debts of the deceased person. Importantly, a deceased person’s family members or beneficiaries will not have to repay any accumulated HECS debt, even if there are insufficient estate assets.

 

Rebecca Tetlow is an Accredited Specialist in Wills and Estate Law (NSW) and a Senior Associate at DDCS Lawyers, 18 Kendall Lane, NewActon, Canberra ACT 2601 and can be contacted on (02) 6212 7600.

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