Students 'will never pay off HECS'

Julia · 11 November 2006

son of baglimit said:
this has been covered in a roundabout sort of way, but i'm just gonna state some facts for those who werent aware - and from my sources thats most of the community.

you only pay off your HECS debt in 2 ways.........

1. making voluntary payments.
2. lodging a tax return which states your taxable income was over the relevant threshold for that particular year.

lets assume then you never make a voluntary payment, and you never have taxable income greater than the threshold (06-07 around 38k). this simply means you will NEVER reduce your HECS debt.

what happens to the debt ? how many knew it dies with you ?
it doesnt line up with other creditors looking for piece of your estate. it simply goes away (at the moment anyway - the govt might change that one day)
in the meantime anyone out there with a grandparent bored with life, get them to enrol in a uni course, put it on hecs and they'll never have to pay it, so long as their income stays below the threshold. or maybe youre in your last year of employment - consider a uni course to give you something to do.

p.s. a warning to those who salary sacrifice or have any other FBT event - this amount is added to your taxable income when calculating the threshold for hecs liability - so dont think salary sacrificing your way out of a hecs debt will fix this - it wont.

enjoy that course.

Absolutely right, Son of Baglimit. A woman I know is in her late 70's, certainly very bright and dedicated to her subject, but she has done a Bachelor's, Masters, Honours, and is now working on a PhD all on HECS which she will never pay off. She is very well off indeed, and is happy to contribute her services as a counsellor on a voluntary basis. So I guess from that point of view she is taking on the one hand, but contributing to the community on the other.

Julia

Kremmen · 14 November 2006

markrmau said:
And neither should they. My last bill indicates an interest rate of around 2% (indexed to inflation). Since returns of 5% pa are easily obtainable (in a cash bank account for example), it is basically free money.

I think this is the most important point. The ALP line is emotive crap. "Students will die before they can pay their debt off" is a lie. They will die before they pay their debt off, not before than can pay it off.

"We now have students carrying such high levels of HECS debt (that) almost a third of them won't be able to pay it back in their lifetime" is, again, a flat out lie. The true statement would exclude the words "be able to". Once you have a HECS debt, growing at a tiny rate, it is obviously to your benefit to pay it off as slowly as possible ... and preferably never. Not only does it disappear when you die, but it doesn't count as a debt for any other purpose. It doesn't affect your ability to get bank credit, for example.

krisbarry · 14 November 2006

Kremmen said:
, but it doesn't count as a debt for any other purpose. It doesn't affect your ability to get bank credit, for example.

Yes it does...as your wages are garnished till the loan is paid off, therefoe your ability to borrow money is somewhat affected.

I was earning $21,000 in a job back in 2000 and my wage was garnished $60 per fortnight. Not a lot some say, but a huge amount when looking at the the annual salary.

Banks look at the net salary and apply a debt/earning ratio when applying for loans.

nizar · 14 November 2006

I heard that if u work overseas you can get away with not paying HECS.
Any substance to this?

nizar · 14 November 2006

Julia said:
Absolutely right, Son of Baglimit. A woman I know is in her late 70's, certainly very bright and dedicated to her subject, but she has done a Bachelor's, Masters, Honours, and is now working on a PhD all on HECS which she will never pay off. She is very well off indeed, and is happy to contribute her services as a counsellor on a voluntary basis. So I guess from that point of view she is taking on the one hand, but contributing to the community on the other.

Julia

In her 70s?
I thought HECS was only introduced in the late 80s and before that tertiary education was basically free?
I would be hope to be well off in my 70s!

Julia · 14 November 2006

nizar said:
In her 70s?
I thought HECS was only introduced in the late 80s and before that tertiary education was basically free?
I would be hope to be well off in my 70s!

Nizar

Yes, her original degrees were in a different field, and in her 70's she decided to take up study again.

Julia

Happy · 14 November 2006

If it is one person in a blue moon, no problems.

But let’s have a look at it from slightly exaggerated perspective – so we can see it better.

Imagine one year, and every year after that, we get twice as many 70 y olds and older, as HSC 18, 19 or 20 y olds, taking up places at the universities.
On a surface we might say good on them, but let’s have a look at consequences of this.

Average life expectancy is around 80, and last few years some people are unable to look after themselves as opposed to look after community.

This would lead to national tragedy, because of shortage of educated people who would be able to provide services for 30 years or more.
(Could compare to IVF at 65)

chops_a_must · 14 November 2006

nizar said:
I heard that if u work overseas you can get away with not paying HECS.
Any substance to this?

This is true.

Julia · 14 November 2006

Happy said:
If it is one person in a blue moon, no problems.

But let’s have a look at it from slightly exaggerated perspective – so we can see it better.

Imagine one year, and every year after that, we get twice as many 70 y olds and older, as HSC 18, 19 or 20 y olds, taking up places at the universities.
On a surface we might say good on them, but let’s have a look at consequences of this.

Average life expectancy is around 80, and last few years some people are unable to look after themselves as opposed to look after community.

This would lead to national tragedy, because of shortage of educated people who would be able to provide services for 30 years or more.
(Could compare to IVF at 65)

Certainly you're right, Happy. But this woman is the only person I've ever known who has resumed studying at this late age. I doubt it's going to become a widespread problem.

I really just mentioned it because it was so unusual. And perhaps also because it's good to see that not everyone tosses in the towel when they get to be old.

Julia

Kremmen · 15 November 2006

Stop_the_clock said:
Yes it does...as your wages are garnished till the loan is paid off, therefoe your ability to borrow money is somewhat affected.

I was earning $21,000 in a job back in 2000 and my wage was garnished $60 per fortnight.

That seems high. HECS repayment on $21k/year should have been about 3%, which is $12/week. Compared to the rest of your tax, it's a very minor issue. Now, you have to be earning over $36k to pay any HECS debt back at all. While a HECS debt might make a tiny difference to your ability to borrow money, it's miniscule compared to what would happen if we had to get into real (commercial/bank/etc) debt to pay fees.

TraderPro · 15 November 2006

nizar said:
I heard that if u work overseas you can get away with not paying HECS.
Any substance to this?

chops_a_must said its true... but is it if you work for an overseas company - paying that country's taxes? or even if you are still being paid in Australia but are working for the same company overseas?

Students 'will never pay off HECS'

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