HECS Debt - How Are You Dealing with It?

Luminary on 16/05/2018 - 00:54

Hi All,

For those that have a HECS debt, I'm curious to know how you are dealing with it. I was always told to just let the tax system do its thing and not pay anything extra, however I've recently logged in to have a look at my debt and noticed that the balance has basically not moved in the past 2-3 years because the indexation applied is about equal to the compulsory repayments. Anyway, so I'm now considering to top up some of the repayments. For those that do pay above the compulsory repayments, approximately how much extra are you adding? If it makes a difference, my HECS debt is above $50,000. :( Any general advice/strategies for paying off the HECS debt would also be appreciated. Is it really still a good idea to not pay anything extra? Doesn't feel great that I've paid a few thousand but the overall balance hasn't moved.

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Comments

  • Masterpupil on 16/05/2018 - 00:58
    +6

    I'm waiting til the government get desparate and offer a decent discount on voluntary oaymebts, and then I'll pay it out. At this point, the money is better off in my redraw reducing my interest payments.

    • geosta on 16/05/2018 - 01:28

      This is the crux of it - it really depends on your circumstances and what else you could be doing with money that you might use for extra payments.

      Firstly, do you have a cash-reserve to cover 3 months of expenses in case you get sick/have an accident/get layed off? If not, sort that out first.

      Secondly, if you've got any other debts, particularly credit cards or a mortgage, pay those off first. Or if you're saving for a house deposit, then put the money into that.

      To be honest if you're only earning enough income to be paying back at a rate that matches (or thereabouts) the indexation, I can't imagine you have large amounts of cash to be making extra payments. In that case, use that extra cash to make your life a little more comfortable, rather than giving it to the government.

      • Luminary on 16/05/2018 - 13:19

        My circumstances are pretty stable/good which is also why I'm considering paying it. It's not that I can't pay. It was more because I was told that it's better to leave it so I never really looked into it until recently haha.

        I still live with my parents when I'm in Melbourne as I'm mostly out of state for work so if I'm injured I'd be alright. Not credit cards but considering purchasing a small property investment which I have enough money for a deposit.

  • mini2 on 16/05/2018 - 01:32
    +7

    It's the cheapest debt you'll ever incur, let it be and deal with it later or when you're dead. Your other debts are likely to be more expensive to service in comparison.

    • ATTS on 16/05/2018 - 09:23

      when you say deal with it when your dead, does that mean someone who has a hecs debt and doesnt work and then dies, there debt is wiped?

      • pjetson on 16/05/2018 - 10:35

        When you die, your debts are paid out of your estate. If you don't die with enough assets to pay all of your debts, whatever can't be paid is wiped.

        If someone else is a party to a debt - say a co-borrower or a guarantor - they have to pay your debt when you die.

        • moar bargains on 16/05/2018 - 20:54

          When you die, your debts are paid out of your estate.

          This is not true (for HECS/HELP), although it's been proposed by politicians regularly and may change in the future. Any compulsory payments need to be made for that financial year (i.e. from tax return), but the rest of it is cancelled.

          Source: https://www.studyassist.gov.au/paying-back-my-loan/loan-repa…

  • airal3rt on 16/05/2018 - 02:14
    -5

    I'm "dealing with it" by not incurring a HECS debt by acknowledging the fact that employers are vastly more enthralled with relevant work experience than they are with paperwork.

    • Tee Rex Arms on 16/05/2018 - 08:54
      +3

      What a sweeping generalisation; and an incorrect one in my experience.

      • mskeggs on 16/05/2018 - 11:42
        +5

        I've been first aid officer at my work for over a decade, yet the hospital keeps keeps carrying on over qualifications when I apply to work as a surgeon! Don't they see it is just paperwork!!!

      • try2bhelpful on 16/05/2018 - 16:32

        Absolutely. If you want to get your toe in the door you need the bit of paper. The fact that the bit of paper means almost nothing once you have some relevant experience is a different kettle of fish.

  • trustnoone on 16/05/2018 - 02:20

    I'm the exact same, have 2 degrees reaching 50k in debt as well :(. So will be eager to see the comments in this thread.

    I didn't really think it through though, but I think Tony Abbot? Removed the discounts for voluntary payment, so in my mind its not worth voluntarily paying back. I mean I do want and aim to pay it all back since that money gave me a chance to study and it could help another person out but it gets paid as part of my pay so it all comes down to how long until I pay it back.

    I don't know if this is right, but I always thought indexation was around 2 percent, but a NAB Rewards saver returns me 2.5 percent so better being in my pocket gaining interest, and giving it back at the last possible moment. But now I'm unsure if that maths makes sense.

    • Luminary on 16/05/2018 - 16:18

      I didn't realise they completely got rid of the voluntary repayment bonuses either. Sigh.

  • DarkOz on 16/05/2018 - 07:16

    Don't worry about it. The interest the ATO charges is the basic inflation rate of some 2-3%?

    The extra repayment would be best served going into something else with higher interest. Like paying off a credit card or mortgage. You should only do voluntary contribution if the ATO offers a discount.

    You will start to pay it off when you have higher income for a long period.

    • Luminary on 16/05/2018 - 16:16

      I better start focusing on getting that promotion then haha. I'm thinking of purchasing an investment property soon so I guess I'd better directing my money there. I just have no other monetary burdens right now which is another reason as to why I was considering paying some off. I just realised there's absolutely no bonus for voluntary contributions now which kind of sucks.

  • altomic on 16/05/2018 - 07:23

    avoidance is dealing with it, right?

    I remember the olden days when the govt would offer large discounts for paying HECS.

    • Gandalf the Thrifty on 16/05/2018 - 07:55
      +1

      Think was 15-20% at one stage but slowly eroded down then eventually gone.

      • Luminary on 16/05/2018 - 16:13

        Wow, 15-20%? I just read that the bonus was completely removed last year. :(

  • Xetrok on 16/05/2018 - 09:05
    +1

    My HECS debt (~16k) took approx 4 years to pay off, no additional payments just via tax.
    Cheapest loan you'll ever get, just focus on your career and the repayment contribution will follow on a sliding scale.

  • Ocker on 16/05/2018 - 09:08

    Leave the country to never return?

    • thetrain on 16/05/2018 - 09:13
      +3

      You have to pay back HECS if you earn overseas income now …

  • sparkles on 16/05/2018 - 10:09
    +4

    It's an unfortunate sign your degree wasn't worth the cost if your income levels are only covering the indexation. Last year indexation was just 1.5%. It basically means without a massive increase in income you will have this debt forever. If you can live with that, just set and forget.

    Leaving the country won't work anymore to avoid your obligations, you now have to declare you are leaving the country and you are still obligated to pay. See here:
    https://www.ato.gov.au/Individuals/Study-and-training-suppor…

    Don't be surprised if one day the government starts eyeing peoples final superannuation payouts upon retirement to cover outstanding HELP debts.

    • Luminary on 16/05/2018 - 16:11

      Definitely would have been stuck in a job I hated if I didn't do further study so I'd say the degree was worth my sanity haha. I've only worked for 2.5 years so hopefully the repayments will start being greater than the indexation. :(

      • moar bargains on 16/05/2018 - 21:13

        You will most likely always be paying more than the indexation, because if you're earning enough to pay HECS, it means you're earning at least $54,869 when you will pay 4% of your salary. For round figures, if your debt is the same amount ($54,869), and it's only indexed by 1.5-3%, you will essentially be paying off 1-2.5% of it each year. Slightly more complicated because of salary growth and debt reduction over time, but that's the general idea. And if it's indexed by more than 4%, it means the economy is going gangbusters, and you should be getting a pay rise too!

        As your salary goes up you'll start paying it off faster. Just forget about it.

  • tsunamisurfer on 16/05/2018 - 11:16

    The HECS payment threshold should be significantly reduced to be inline with the minimum wage.

    HECS should be changed so that it becomes a secured creditor against the borrower's estate.

    Too many people are paying too little or never paying at all.

    • sparkles on 16/05/2018 - 12:24

      I don't agree it should be reduced to minimum wage. But it could and should be lower than the current $56k threshold. Any degree holders earning a proper wage appropriate to their qualification should pay off their HECS with no problem within 5-10 years. The problem lies with the tax avoiders and the absconders.

      People should re-think even getting a degree these days. My degree cost $12k, the same degree would now cost near $40k. I honestly believe I could have gotten to the same point without it.

  • iratepirate on 16/05/2018 - 16:24

    All education should be free. Society and the economy benefits - the returns on education pay for themselves.
    Everyone that changed the law so that university education is user pays got their education for free.

    Just another example of I got mine now you have to pay for it.

    • whooah1979 on 16/05/2018 - 18:36

      All education should be free.

      it should be free, but only for those that graduate. graduate and get a free uni degree or as many as they can. those that fail to finish should pay back the fees in a form of a levy on their income.

  • moar bargains on 16/05/2018 - 21:23

    If you are a Maths/Science/Nursing/Education graduate and were working in the field in 2015/16 and/or 2016/17, you can get a small payback from the government. See here for details.

  • original15 on 16/05/2018 - 23:00

    was at about 72k, was making some inroads and there were a couple of years early where it broke even with indexation (worked FT for a year in middle which also helped), one year i didnt file my tax return (so so dumb) but now am at about 50ish$K remaining, with wage growth it goes down quickly, reckon it wont take me long to get rid of. DEFS wont make voluntary repayments unless there is an incentive to do so

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