The hill does not look so steep so I am guessing that erosion is not a big threat. I think the bigger concern is the septic system. I am not so familiar with septic systems since we have sewer service here but a few ideas come to mind. First, it would be important for you to locate exactly where it is and what exact area is dedicated to septic. Second, some types of plants are not good for the drain field (I think trees are ruled out for instance). Third, at least some sources reccommend against planting edible crops over the septic area but I'm not sure if the issue is just that they don't think you should be digging around there and possibly getting infected by something or if uptake into the plants is a concern. If a food garden is a no go, a flower garden would look great in that area. With all of the sand I think you will want plants that can handle things a little bit dry. You might want to run your question by the soil forum. I think this might have come up over there before and there are some knowledgable people that frequent that forum.

Here is a link that might be useful: Native Plants for septic system areas

I think its best to plant vegetable in your backyard hill.