HECS debt

[pan]

simple question

should I pay it off early or wait it I earn over the threshold?

 

[ROE]

simple question

should I pay it off early or wait it I earn over the threshold?

Pay off the lum sum save you around 10%-15% discount from my memory so if you got money do it ..can you invest that money and get better than 10-15% after tax?

 

[pan]

I believe it is 20% discount. But HECS is an interest free debt.

 

[pan]

Pay off the lum sum save you around 10%-15% discount from my memory so if you got money do it ..can you invest that money and get better than 10-15% after tax?

can get a between return putting it in super.. does the govt still match dollar for dollar contributions?

 

[JimBob]

I believe it is 20% discount. But HECS is an interest free debt.

It is interest free, but it still goes up with inflation each year. If you put off paying it off, the debt will still increase each year.

 

[prawn_86]

simple question

should I pay it off early or wait it I earn over the threshold?

Obviously it varies from pewrson to person, but i chose to leave mine

Pay off the lum sum save you around 10%-15% discount from my memory so if you got money do it ..can you invest that money and get better than 10-15% after tax?

The reasoning for leaving mine was the fact that providing i am earning a return > than inflation, i am putting my money to better use than paying off my HECS debt. If i say 2% (extremely low example) more than inflation per year, it takes 5 years without compounding to save that 10% i would have got the discount for

 

[Largesse]

I will get a 100% discount when I move overseas and never pay it back

 

[Hyperion]

I will get a 100% discount when I move overseas and never pay it back

Don't feel any obligation to contribute towards your already highly subsidised education?

 

[nunthewiser]

I will get a 100% discount when I move overseas and never pay it back

Thats my cash you nicked ya cheeky bugga

 

[prawn_86]

Don't feel any obligation to contribute towards your already highly subsidised education?

I dont. I believe that if tertiary education was free and more accesible to more people, it wqould add more value back to the economy in the long run anyway via them paying higher taxes due to (generally) increased earnings for those with degrees

 

[pan]

Obviously it varies from pewrson to person, but i chose to leave mine



The reasoning for leaving mine was the fact that providing i am earning a return > than inflation, i am putting my money to better use than paying off my HECS debt. If i say 2% (extremely low example) more than inflation per year, it takes 5 years without compounding to save that 10% i would have got the discount for

But then you have to pay a debt off when you start working. I am moving towards paying it off just because when I eventually get a job i'll be debt free.

 

[son of baglimit]

interesting chat - some quick facts.

- yes it rises in line with CPI, every june 1.
- you dont have to think about it unless your 'adjusted' taxable income exceeds the required threshold - $43+ this FY year....from memory.
(adjusted being adding back those items like salary sacrifice, rental losses, investment losses etc)
- if you NEVER reach that level of income, once you die the debt dies with you. encourage elderly pensioners to do uni courses - never pay the fees.
- if you do pay $500+ voluntarily, or clear the debt, you get 10% added to your payment as thanks.
- if you do want to clear the debt, either do it before the june 1 CPI, or just before you lodge your return, and youll get your salary contributions back, with that 10% bonus still added to help.

 

[MITCH027]

You get a 25% discount if you pay back HECS before the census date (while at uni). This is significant, but you might not be able to afford it. Not many people are able to make 25% returns pa. This "return" is also tax free

I will have to pay it off in a lump some at some point over the next couple of years as I want to take on a large mortgage in a couple of years... it will significantly improve my borrowing power

PS. if you never make over $43k, you have wasted 4 years at university

 

[Ozymandias]

The reasoning for leaving mine was the fact that providing i am earning a return > than inflation, i am putting my money to better use than paying off my HECS debt. If i say 2% (extremely low example) more than inflation per year, it takes 5 years without compounding to save that 10% i would have got the discount for

This is the critical factor here, TIME. Repayment of HECS is fairly slow if you stick with the minimum payments, and if you've still got >24 months to go, you'll likely beat the 10% discount with investments. But you need to do the calculations for yourself with a specific investment in mind. Also bear in mind when you do your calculations, that the 10% discount is post tax. Never forget the tax...

I plan to pay mine off around the 12 month mark, depending on my situation at the time.

 

[Ozymandias]

You get a 25% discount if you pay back HECS before the census date (while at uni). This is significant, but you might not be able to afford it. Not many people are able to make 25% returns pa.

They don't need to. See my post above for why.

PS. if you never make over $43k, you have wasted 4 years at university

Now there's a value judgement. Most people who go to uni for say... philosophy, aren't doing it for the money.

 

[MITCH027]

People who do not go to university for the money won't care what happens with their HECS

The 10% discount is probably not worth making the lump sum payment. 10% return after tax isn't as difficult as 25% is

The 25% discount is more useful. If you start considering compounding interest, etc, it is only fair to then consider the 25% in relative terms also

You save 25% the first semester it is paid. If you hadn't paid this, two semesters later it would've been indexed. Every year after that it gets indexed also. Debt compounds just as investments do (credit cards anybody?)

That being said, not a lot of university students have the capacity to make the entire upfront contribution. Also, having savings available for a rainy day is also important for lots of people. University kids probably want to party also

 

[suhm]

You get a 25% discount if you pay back HECS before the census date (while at uni). This is significant, but you might not be able to afford it. Not many people are able to make 25% returns pa. This "return" is also tax free

I will have to pay it off in a lump some at some point over the next couple of years as I want to take on a large mortgage in a couple of years... it will significantly improve my borrowing power

PS. if you never make over $43k, you have wasted 4 years at university

I have never understood why people pay their hecs fees upfront, it is the cheapest loan you will ever get in your life.

The discount for upfront payment is only 20% vs 10% if payed as a lump sum later in life and you don't have to pay it if you go overseas.

Just putting your money in high interest savings account has usually given you a return greater than inflation (I think most people here would hope their investment returns could beat inflation) and average weekly wages have also typically increased by more than inflation in the recent past.

The loan is so cheap I borrowed 10k through os-help which has a 20% surcharge so my HECS debt increased by 12k (10.8k with the discount) instead of using my own money to go study overseas for a year, I would have borrowed more if I could.

Given you are unlikely to start paying off your debt until you start working and it will take you a long time to pay off your debt at the minimum repayments the time value of the money becomes very high. This is especially true the longer you study (I did a 6 year degree and will probably end up paying off the debt in 8-10years) and now that they have increased the fees charged as your loan will spend longer compounding at the inflation rate.

 

[suhm]

also heaven forbid you die, the government doesn't send in the debt collectors looking for their share. not exactly a scenario I want to entertain though.

 

[Hyperion]

I dont. I believe that if tertiary education was free and more accesible to more people, it wqould add more value back to the economy in the long run anyway via them paying higher taxes due to (generally) increased earnings for those with degrees

Well if people go overseas after graduating like another poster was suggesting then the Aust gov wouldnt be getting any taxes...

 

[Largesse]

To hyperion,

No for two reasons.
Firstly being when my old man was doing uni, it was all free.

And secondly, i dont have a second reason.