How are HECS/HELP debts treated in family law matters?
9
June 2023
It is becoming more common for separated parties to have a liability arising from the completion of their tertiary studies, referred to as HECS / HELP fee debts.
A common question we are asked is, are HECS / HELP debts relevant to a family law property settlement?
The short answer – yes, but its impact on the overall property settlement depends on the particular facts of the case.
The Court has taken different views on whether a HECS debt is classed as:
- A debt to be included in the “property pool” of the relationship or marriage; OR
- A personal liability to be excluded from the overall property pool.
Some of the factors the Court considers are:
- Whether the parties jointly agreed to the studies that resulted in the HECS debt.
- Whether the parties have jointly benefited from the qualification that gave rise to the debt, i.e. additional income to support the parties or family.
- If repayments have been made towards the debt either through the income that the party is earning, or from joint funds during the relationship.
- Whether the other party had a HECS debt as well and if it was paid off or remains a liability.
- If the studies have been completed or if that party will receive the sole benefit of the qualifications post separation.
Case examples
- 13 year relationship. The husband’s HECS debt of $26,406 at trial.
- The husband previously paid off a HECS debt of $11,692 during the relationship, with the assistance of the wife.
- The wife worked to support the children and husband while he studied. The family enjoyed the increased income resultant from the studies for only two and a half years.
- The husband argued that he would no longer earn an income as a result of that qualification, and intended to pursue another qualification.
- The husband’s HECS debt was excluded from the property pool as it was found to be personal to the husband and the repayment of same will be dependent upon his receipt of income.
- 14 year relationship. Wife’s HECS debt of $13,229 at trial.
- The wife completed studies during the relationship and paid off the debt each fortnight through her income.
- After the degree was completed, and just after the parties’ separation, the wife’s taxable income was only $1,269 per annum.
- The HECS debt was excluded from the property pool as it was found to not contribute to the wife’s earning capacity before the parties’ financial separation.
- 18 year marriage. The wife’s HECS debt was $26,858 at trial.
- The wife studied during the relationship.
- Both parties suggested that the wife would “energetically seek out paid employment” and therefore the Court formed the view that the debt would be repaid in the future.
- The HECS debt was included in the property pool. The court noted, however, “what might seem like an unfairness about that will be addressed below in s 75(2)(h) or if that is read as literally limited to maintenance cases, in s 75(2)(o)”. these are the “future needs” factors.
- Murray & Murray
- 13 year marriage. The wife’s HECS debt was $54,564 at trial.
- The wife completed her studies during the relationship however had not completed her qualification. A further HECS debt of $27,000 to be incurred until the completion of the wife’s studies.
- The husband contended that the amounts should not be included in the property pool as the wife would need to earn a certain level of income before they were repayable.
- The wife asserted that she is entitled to reskill and that she only incurred the debt as she could not pay upfront.
- The HECS debts were excluded from the property pool as they were considered to be contingent liabilities and not immediately payable. The Court noted, however, that it is better that these items be dealt with in s 79(4)(d)– (g) considerations (which is where the Court considered the future needs of a party and the impact of an order on their earning capacity).
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