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Student Debt

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sabre_ac

sabre_ac

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I was curious to hear how people have been managing their student debt since graduating and if their plans will change based on the current federal budget.

Anyone considering increasing the level of repayments to avoid the increased interest rates?

For those of you overseas, does it bother you that the government may soon be able to chase you down for repayment?

If the new rules regarding an increase in interest rates are introduced I know I will be tempted to pay it back quicker. Frustrating that they removed the 15% reduction incentive for early repayment, I think big picture that has done more harm than good.

For those who are currently students, how do our course fees compare to the rest of the world?
 
sabre_ac said:
I was curious to hear how people have been managing their student debt since graduating and if their plans will change based on the current federal budget.

Anyone considering increasing the level of repayments to avoid the increased interest rates?

For those of you overseas, does it bother you that the government may soon be able to chase you down for repayment?

If the new rules regarding an increase in interest rates are introduced I know I will be tempted to pay it back quicker. Frustrating that they removed the 15% reduction incentive for early repayment, I think big picture that has done more harm than good.

For those who are currently students, how do our course fees compare to the rest of the world?
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Default payments here since graduating (end of 2007). Up until now the interest rate has been low and I am able to keep it going down every year. I should have it paid off in 1-2 years

That being said these days course costs are up and interest rates on the loan is up too. You would have to get 100K+ to make an impact on the principle.
 
sabre_ac said:
For those of you overseas, does it bother you that the government may soon be able to chase you down for repayment?
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The changes mostly stink, but this is fair enough.

You should not be allowed to study at the expense of the federal govt then skive off overseas and never pay it back.
 
I think the worst proposed change is making the HECS/HELP debt repayable on death. I know this has only been floated at this stage, as opposed to the other changes that are going through in 2016, but it could really burn some people down the track. Imagine a guy late 20s/early 30s with a family and mortgage and still a big hecs/help debt and he gets cancer/dies in a car accident/whatever and the government comes knocking for tens of thousands on his death. Ouch for the family left behind.

I have enough liquid assets to knock mine in the head just before June 2016 if need be, but I haven't been able to get a professional job in my field of study, so if I had to make compulsory payments when earning just over the threshold I'd barely cover what they will end up charging me in interest on it (and let's face it, the interest rate is only going to be increased in the future and the earning threshold dropped when the government privately sell the debt off - that's a certainty in the future and what the changes have been made for).
 

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almost paid off but will speak to my accountant next month with regards to what i do from here. i tend to favour paying less now so my return is bigger :D but im silly like that.
 
The proposed interest rate is the Australian 10 year government bond rate (currently 3.73%), so a simple savings account e.g uBank (4.01%) etc will almost definitely give a higher interest rate then the ten year rate.

HECS is probably the cheapest form of debt available to everyday people, and excluding bonuses for paying early and tax considerations, I think it makes sense to only pay the minimum repayments..
 
George Washington said:
The proposed interest rate is the Australian 10 year government bond rate (currently 3.73%), so a simple savings account e.g uBank (4.01%) etc will almost definitely give a higher interest rate then the ten year rate.
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You have to factor in you are getting taxed 30+ cents in the dollar on interest income in that bank account. Still worth having liquid assets at the moment IMO but they are shifting the goal posts to make it easier to sell off to private firms in the future, that's when it will start to hurt carrying the debt.
 
Three things to consider:

HECS is effectively double taxation. If you earn $100k you pay 8% HECS, so $8k. You then pay income tax on $100k, not $100k less the $8k you've already paid in HECS ($92k).

HECS is not progressive. The threshold is 7.5% up to $99,069 and 8% for $99,070 and above. If you earn $99,070 you don't pay 7.5% on $99,069 plus 8% of the extra dollar, you pay 8% of the lot.

3.74% needs to be understood in the context of each HECS debt. Currently repayments kick in at 4% at $53,345. That's $2,133.80. Working back from 3.73% that means at that salary you can have a HECS debt of $57k without it growing over time from the interest at that rate. As HECS debts grow, so too does the interest on them. I wouldn't want to end up in the trap of letting a HECS debt increase over time which may happen with the combo of deregulated fees, higher interest and degrees leading to low paying employment.
 
Scotland said:
Three things to consider:

HECS is effectively double taxation. If you earn $100k you pay 8% HECS, so $8k. You then pay income tax on $100k, not $100k less the $8k you've already paid in HECS ($92k).

HECS is not progressive. The threshold is 7.5% up to $99,069 and 8% for $99,070 and above. If you earn $99,070 you don't pay 7.5% on $99,069 plus 8% of the extra dollar, you pay 8% of the lot.

3.74% needs to be understood in the context of each HECS debt. Currently repayments kick in at 4% at $53,345. That's $2,133.80. Working back from 3.73% that means at that salary you can have a HECS debt of $57k without it growing over time from the interest at that rate. As HECS debts grow, so too does the interest on them. I wouldn't want to end up in the trap of letting a HECS debt increase over time which may happen with the combo of deregulated fees, higher interest and degrees leading to low paying employment.
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Agree on point 2, shouldn't be too hard to get that changed. Agree on point 3.

But disagree on point 1. Not double taxation, just a forced loan repayment. You could run HECS repayments through Centrelink or a different agency rather than through tax returns, it is just a simpler way of doing it. You're only paying back money you owe, you aren't paying the government anything earnt. Think about the bookkeeping at the government when they receive your HECS payment as part of your tax payment. The forced HECS payment will be a credit entry to a loan receivable, while the tax payment is a credit entry to income.
 
Can someone explain to me in further detail how the indexing works? I have almost paid my hecs off but my partner did a course for one year and dropped out and doesn't earn over the threshold.

Are we better off making some voluntary repayments to kill her debt before it spirals? If we get married do I assume her hecs debt with our combined income?
 
craffles said:
Can someone explain to me in further detail how the indexing works? I have almost paid my hecs off but my partner did a course for one year and dropped out and doesn't earn over the threshold.

Are we better off making some voluntary repayments to kill her debt before it spirals? If we get married do I assume her hecs debt with our combined income?
Click to expand...

HECS increases at CPI so it's pretty much the cheapest debt you will ever owe, so while paying it off voluntarily is fine, if you've got other interest-bearing debts it makes more sense to pay them first. ~2-3% percent isn't worth worrying too much about, imo (especially for only a single year of study).

she only has to pay back the debt based on her income alone.
 
Long Live HFC said:
HECS increases at CPI so it's pretty much the cheapest debt you will ever owe, so while paying it off voluntarily is fine, if you've got other interest-bearing debts it makes more sense to pay them first. ~2-3% percent isn't worth worrying too much about, imo (especially for only a single year of study).

she only has to pay back the debt based on her income alone.
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Thanks for the input. I have never paid much attention too it because the interest is so low as u pointed out.

So if we get married it has no impact on on her hecs debt?
 

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For me, save up 5k per year, pay before may. Will be hecs free in my thirties.

Its non-deductible and a no-brainer to pay off. If you have a primary residence mortgage though, it should take prcedence.
 

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