With the rising cost of tertiary education, it is now common to see sizeable HECS/HELP debts appear in property settlements. A common question that arises is how the Federal Circuit and Family Court of Australia (the Court) will deal with these debts.  Depending on the circumstances, the Court may treat them as part of the asset pool to be shared between the parties, or as a personal liability that remains the responsibility of the individual.

Factors considered by the Court when determining if HECS debts are included in the property pool

When deciding whether to include HECS/HELP debts in the asset pool, the Court considers the individual circumstances of the case, but will often be guided by the following factors:

1. Whether the HECS debt was incurred during the relationship and if the undertaking of the study was agreed by the parties.
2. Whether the debt constitutes a current liability or a contingent liability.
3. Where the debt is contingent, the likelihood of the debtor earning above the repayment threshold and commencing repayments, or whether it is likely to remain contingent.
4. Whether the qualification obtained has been used to generate income during the relationship, and whether that income benefitted both parties.

Whether the other party also had a HECS debt and whether repayments were made on that debt during the relationship.

What this means in practice

HECS debt treated as a joint liability

In Loncar v Loncar [2020] FCCA 2094, the wife sought to include her $11,615 HECS debt as a joint liability, arguing she had retrained to work in the public sector while raising the children, who were financially dependent on her. The Court held that the debt, which commenced two years before separation, should be treated as a joint debt for adjustment purposes. However, ongoing repayments remained the wife’s personal responsibility, as they were contingent on her future income.

In Lane & Owen [2010]FamCA 575, the Court found the wife’s HECS debt should be treated as a joint liability because the husband’s HECS debt had already been repaid during the marriage using joint funds. The Court considered it equitable for both debts to be dealt with in the same way.

In an 18-year marriage, in Panagakos & Panagakos [2013] FamCA 463, the wife undertook study while the relationship was ongoing. The Court noted she was likely to actively pursue employment and repay the debt, so it was included in the property pool as a joint liability.

HECS debt treated as a personal liability

In Mullins & Birchmore [2014]FCCA 1297, a 13-year relationship where the husband incurred a HECS debt. During his studies the wife supported both him and the children and also helped repay a previous HECS debt of his. After qualifying, he only worked in the field for 2.5 years, so the family received little benefit. He then planned to stop working in that area and continue further study. The Court treated the HECS debt as a personal liability, noting repayment would depend entirely on his future income.

In the case of Zimin & Nickson [2014] FCCA 206, at separation the wife’s degree was incomplete. As only she would benefit from finishing the studies, her HECS debt was treated as her personal responsibility.

In Partington & Cade [2008] FamCA 945, both parties had HECS debts of roughly similar amounts. Neither had gained employment in fields linked to their qualifications, nor was repayment likely. Each party remained responsible for their own debt.

In Thomm & Painter [2015] FCCA 1001, during a 14-year relationship the wife incurred a HECS debt but only commenced employment after the parties were financially separated. The Court   found that her qualification did not benefit the relationship during its course and therefore the $13,229 debt was treated as personal liability.

HECS debts are often raised in property settlements, and their treatment is nuanced. Given the potentially large sums involved and the way the Court may consider them, seeking legal advice can be essential.

At Nicholes Family Lawyers we have expertise in handling complex property settlements, please do not hesitate to contact Nicholes Family Lawyers on 03 9670 4122 for further guidance.