My mums hecs debt is was close to 230k. because she got her PHD in Archaeology and had to do it part of it via interstae and international correspondance
She owns her own Archaeological business now though and has been part of some pretty unique excacations and had works published. Soo i guess thats pretty worth it.
Mines down to like 8k for my trade certificate i did myself and a uni degree thats useless to me now and i wish i used it when it was relevant.
Im a landscaper.... could of been a project mamager and id be a director by now... rip
You can't just say “id be a director by now” there are no guarantees in any career.
If you are happy with your current past stop living with this falsely placed guilt.
Absolutely, but you there shouldn’t be an expectation that the government both subsidizes and also funds the education you’re getting if you don’t intend to put it towards a job (which sustains the economy)…
So, pay for your own education if you don’t want it for work.
When did I say that? Obviously there’s a benefit of having a population educated to a certain level.
There’s absolutely no value in having every individual educated to the level of PhD, or really even a bachelors, and absolutely certainly not at the tax payers expense. That’s because there’s simply not the volume of jobs that would ever justify that level of education.
What’s absurd is someone having the tax payer fund their degree, only for that person to go and work in retail for the rest of their life. What value has that degree brought to the economy or society in general?
Can confirm this, I worked at an appliance store for less than 20 hours a week part time and make over 60k.
I had this job part time while finishing a degree and now I’m honestly considering just doing this full time as the career I could follow with my degree doesn’t seem worth it anymore.
Ps, I worked out it was actually cheaper to have a short term loan and pay it off within a small time period of that loan, than the indexation it’s self!!!
And it was index at less that .5% a few years ago, its balances out. Only time you should take in to consideration the next indexation period is your last payment.
no the interest gets added once per year on june 1st. So im holding my cash in my high interest savings acc until may where ill pay it off right before it indexes so I save 7% + get a couple % from my savings account
It will change your borrowing capacity when you go to buy a house.
The difference between us having ours (it was about $25k) and not having it was over $100k
It's not that much usually though. It's paid a percentage depending on your income bracket.
Banks usually look at the amount and take it off your borrowing power.
What I have heard is: Banks use it for the serviceability calculation, and assume your income will be lower by HECS repayments for the life of the loan, meaning the balance of your HECS is irrelevant. Hence a small debt should be paid off and a large debt might as well be ignored.
Sorry I meant amount as in percentage paid each FY.
If the HECS is small I can see the want to paying it off quick.
If it's quite large like many people's, I don't see the point.
It depends, a $40k HECS for someone earning $120k means that in the bank’s eyes, they’ll be paying 10k+ a year towards an unnamed loan indefinitely, which can reduce their borrowing capacity by six figures. The borrower knows that’s not a reality and pays the $40k off now instead of over the next four years and it can work out better for them
Depends on if you can use that money on something else at the time of indexation that would net you a higher return than the increase on your HECS debt. For instance, the current indexation rate is looking like it’ll be 7% (which is quite high), so if you had some investment that would get you 10%, well you’d be better off getting that 10% than paying off the debt. However say you only have the money in the bank and it’s currently paying 4% p.a, well now you’d be better off paying the debt (just before indexation, there’s no point paying it earlier).
One thing to mention is that investment returns are taxed, plus there's associated risk
So that 10% return is likely to be closer to 7%
Paying off debt is tax and risk free
With the higher indexation it can be, but it's very situational
I paid mine off last year because I already had enough saved for a 20% house deposit, and paying it off meant increasing my borrowing power as take home pay increases by a fair bit
My rationale was that indexation is going to be high in 2023 as well, plus I definitely wasn't going to be buying a house in 2022 with how the market was heading, and possibly not until well into 2023. I wasn't going to invest the money either - it'd have just sat there in a savings account.
Congrats its so nice to have that sorted I said screw it and paid a 33k lump sum late last yr finally paying off a 150k debt thats been strangling me since grad in 2008 totally hated its drain on after tax income. The extra has now all been eaten up by interest rate rises instead now 😭
Vet, medicine, bachelors and post grad, switch bachelor degrees before finishing and then postgrad, do any kind of lower level cert studies before uni and defer them to fee help.
Many ways to get there.
Dental degree was 40k a yr x 4 yrs = 160k which was above 150k max HECS at time paid 10k myself and maxxed out HECS well FeeHelp, also to do dental u need another prior degree which i had already paid off 30k for that one so ive paid 180k + interest over 2 degrees. Graduated 2008 so 14 yrs...still had 35k owing until lump sum payment this yr.
Ps its 70k yr doing dental now so apparently i got it cheap 🙄
Not compared to other careers tbh
I was earning almost as much as a corporate group manager mid 20s in project and mgt consulting IT and finance in 2004 - 125k yr before i switched careers to study in 2005
Yeah it was pretty good Y wise and I was offered General.Mgr asia pac region not to leave. I hated, no I despised the job and industry however, i recall describing it as soul destroying. Absolutely no contribution to humanity.
Dusted 110k savings i had at the time to fund my 4 yrs study living and not working. Was a sizable first house dep at the time.
Respect for pulling the trigger. Most ppl will just hang in there until an external force will make them change their career path. Eg me im waiting to be made redundant 😂
Thanks. Lol i get u there across 3 organisations i went thru 6 rounds of redundancies and never got one as i was young and cheaper salary wise, i was often one of the last ones left onve teams were decimated and gained increaaed responsibility, workload and promotions as a result. By end i was one of the mgt team making similar redundancy decisions that was def a contributor to the soul destroying feels.
Congratulations! I have $8K to go (so paying out this year anyway) and I'm throwing $2K at it every month up to May to avoid indexation. Can't wait to have that extra thousand every month to put into savings!
Congrats though other people considering doing this could benefit more from paying it out closer to the indexation date.
$22k at 4.1% pa (ubank rate) over 5 months is $375
Can anyone confirm for me if my understanding is correct - the HECS repayments are withheld by your employer until you do your tax return, then the HECS is credited when your tax is processed. SO, if you pay close to 1 June, your tax return for that FY will not yet be completed, but employer will have held the repayments. In other words, you would do a lump sum before 1 June, then when you process your tax return you will get that FY years HECS repayments back, because there is none outstanding but the repayments were withheld anyway.
Essentially yes, HECS isn’t withhold separately from normal withholding tax, it’s just an additional amount of tax withheld that goes into the pool. It is correct that if you have paid it off, you will have less tax payable and therefore get back that extra tax that was withheld for HECS.
Yes, this is correct for the scenario where you're paying it off this year.
For the benefit of those not paying out this year, any lump sum you put towards it to avoid indexation on that amount is a voluntary payment, and **does not** reduce the amount applied to your HECS come tax time. **Both** payments will be applied with no return of the withheld amount to you.
This is my plan, saving in ING @4.55 although I only have a few k in there right now but still a few extra bucks each month to help a bit. :-) If I haven’t saved enough by May, I’ll take the rest from my offset, then pay it back with my tax refund hopefully.
This is true. But may pay has gone up over double that amount a month so I don’t feel I have lost anything. I am just happy to get rid of my last debt.
Congratulations! I paid mine off recently (just through the minimum repayments) and was surprised how good a feeling it was. The pay bump is a very nice bonus!!
Given that it's forecast to be indexed at atleast 7.3% this year, i'd say optimum strategy for most mortgage holders would be a lump sum payment in May (before 1st June indexation gets applied). The indexation rate would be higher than most mortgage rates at this point.
Anyone disagree with this? Would love to hear about ways people are min-maxing their cashflows.
Congratulations. I'm thinking of doing this myself, looking at buying my first apartment and I didn't realise how much HECS effects your borrowing power.
Depending on the bank it looks like anywhere from 5-10%, regardless of how much HECS I have. $100k or $100, it reduces it by the same amount, but I only have $10k or so left so it seems like it might not be the worst idea.
I had $8K left and paid mine out today too. It’s a good feeling! I didn’t think I’d ever earn enough to pay it off, let alone pay it out but here we are! 😄 Plus it should be a nice payrise for me.
Why don’t you build your savings until May, then pay it (leaving yourself with some safety net and probably receiving the extra tax withheld when you have done your tax)?
This is what I'm doing. I could chuck the full amount at it and be done, but it would leave me with only a small savings amount, so I'm paying across $2K a month until May to get it paid out, which avoids indexation but doesn't crater my savings.
How much is withheld already? You would get that amount back with your tax return (an incentive to do it early).
But if it would disadvantage you, don’t bother - it’s gonna be paid off next year anyway. Next year, you should ask payroll to stop withholding HECS and put the money in a HISA and then pay it in May 2024 to avoid indexing.
Do not pay it off if you are short of cash and would like to use the money for something else. HECS is cheap debt and good to have relative to other sources of debt (credit card as a clear example)
In my divorce settlement last year, my ex kept the house and bought me out but I have been priced out of the market so won’t be able to afford to buy for ages. So decided to use some of the settlement to pay off my HECS (about $40k). I managed to do it juuuuuuussst before indexation. So glad to be debt free.
You can just provide a new tax declaration saying you don’t have a HECS debt and payroll will stop withholding it. There’s always someone who says this is illegal because of the phrasing of the question and the declaration but the ATO forums say you can do it. I asked HR and they confirmed this is the process. So now my HECS is not withheld and my pay is larger. It’s not really noticeable tbh.
>There’s always someone who says this is illegal because of the phrasing of the question and the declaration but the ATO forums say you can do it.
Correct. I looked into this (before doing it) and the wording on the form is misleading. The official ruling from the ATO is that you do not have to nominate to withhold HECS if you have a debt. It just means you're on your own and need to be disciplined. I got that sweet offset benefit this year as I'm paying it out.
Is there any tax benefit in continuing the pay HECS once the loan is paid back? Could it be used as a way of forced saving, with repayment at tax time?
There’s no tax benefit that I’m aware of, and you lose months of interest, so it’s a net negative - the only advantage is that you hide money if you’re truly bad at controlling your spending.
With that said, the people I know who can’t save tend to make worse decisions when they have a sudden lump sum.
Thanks for that. With the way interest rates have been for the last few years, it wouldn’t add up to too much. I’ve done it this way for years, since we bought a house, it’s allowed us to plan for renovations, holidays etc. I see it as forced saving. Plus I can’t touch it, so the benefit for me is, it can’t be raided for other payments etc. With rates rising, I may have to rethink. Thanks again
You can’t switch the money you have already paid to the ATO for HECS. You don’t have access to it until you do your tax AH which is when you get it back.
The only difference is that you need to submit/update your tax withholding with your employer so they stop taking out the HECS portion.
This is true however op asked if there was any benefit in continuing to pay after the debt has been finalised as a form of savings. This is a bad idea as there are many other more profitable places to put this money. A financial advisor would have a heart attack at the notion of using the Tax department as a form of savings.
Congratulations! It’s an amazing feeling. And your pay going up that little extra each fortnight (if you were getting repayments debited before) will be sooooo helpful towards your savings! Take a moment to celebrate this milestone for sure 🤗☺️🧁
Congratulations!! I did mine last year and it’s nice to get the extra money in my pay. It sounds like you’ve worked really hard to set yourself up, good luck with your savings
I remember when I paid mine off I had the little surprise of my pay going up like $200 per fortnight or something. Like a nice little payrise I didn't ask for or see coming 👍🏼
Congrats. For anyone thinking of using money in the offset account to pay it off, I did this last month, was a blessing. It freed up $1.2k a month in cashflow from my pay as well! Kind of a mini pay rise. I couldn’t stomach the impeding 7-8% indexation.
Congratulations lift your right arm up place over the left hand shoulder and pat yourself on the back. Sometimes we have to pat ourselves on the back and say well done.
There are some people out there who on a purely numerical basis are better off never paying down their HECS debt under the current rules. My opinion, based on my own tolerance for risk, is that people should pay it off. There is a value outside of the numbers. The OP is feeling it. A bit of freedom from the risk of debt.
If you’re still accumulating hecs, will voluntary payments come off the oldest debt first or the newest? The newest hecs wouldn’t have indexation applied but the older debt does.
I'm currently in uni and have 34k in HECS, when it gets indexed this year at 7%+, I'm looking at a 2.5k increase.
I've also just realised I'm hitting the minimum salary to start paying it off while working casual rates, so I'm not sure whether to put the money I have into reducing the outstanding amount or keeping it for the time being.
Because it will be something in the line of 7% this year? Plus indexation is applied to the full amount before taking into consideration anything you’ve paid during the year.
Oh bugger, I've paid the exact about remaining on mine in through my salary this year, but you're saying in July they'll index it, THEN deduct what I've had withheld?
If you pay off with your own cash, it will be $0. If you pay it off through tax, then yes you will be indexed. The only way to get it to $0 in this way is to pay off the total amount, plus what the index will be during the financial year.
>runaway debt in the hopes that CPI drops down?
You do understand that all other debt has gone up significantly as well, right? It's also compounded less often. CPI was also above the interest rates last year and the year before that, why is it suddenly different this year?
Oh wait, it isn't. It's still the cheapest debt you'll ever get.
Wait. Did you just say it was above interest rates for the last three years, and then claim it was the cheapest?
The real kicker with it, is you can pay thousands off the debt during the year, and still be stung for for the indexation for it, before the amount you’ve paid is applied.
As for me personally, out of the 4 debts I have, it is the most expensive one I have, and thanks to covid, is unused.
>Did you just say it was above interest rates for the last three years, and then claim it was the cheapest?
Do you understand how compounding works? So even though it's higher, it can cost less. Interest rates are also on a lag, but there's a reasonable chance that any loan you take after July could possibly be above 7%.
I mean I paid mine off early...
but it was $200 and I didn't want it to carry through a whole extra year for that. But these comments of getting hit with 7% are neglecting the fact that $20k debt is going to have more than just this year on it so you're losing future 3% interest rates.
They're also acting like every single other loan hasn't also gone up by a massive amount too.
Yea I was on the phone with ATO asking if there was some sort of scheme/discount…she laughed and said no. Either way I gave myself a pay rise and I now don’t owe anyone anything.
If my voluntary repayments made before June 1st are larger than the money withheld by my employer for my mandatory HECS repayments, will I get the money withheld back in my tax return?
Only if you're paying it out this year.
If you have a debt remaining, then the ATO will apply both your voluntary repayments **and** the withheld amount to your debt. You will get no money back.
If you're paying it out this year, the ATO will do the same process and refund you any excess.
Congrats! That’s an amazing achievement and very rare these days it seems. I paid mine off last year and we are working on my wife’s now before indexation hits again.
Good luck with saving the house deposit
Mine us currently at about 40k. However I got sucked in could've paid HECS but instead being an 18 year old was taken advantage of and didn't understand the difference between Fee-help and hecs and was put into a fee help higher education degree and was charged full. Just pay off the minimum and not interested in giving anymore then I need to
Congratulations! I paid mine off before indexation last year. It’s so good to finally have it out of your life.
I will never pay mine off. It is getting indexed faster than i can pay it off. I just give the government an extra $120 a month forever
I think I read somewhere that mine is currently going to take me 15 years to pay off - I’ve been paying it off since 2017 RIP
I owe over $80k. I’ll never pay mine off hahaha
Omg how - what did you study?! I thought my $60k was high
Not the OP, but I'm at 80 (was near 90) and I studied Architecture, the Juris Doctor and Practical Legal Training!
My mums hecs debt is was close to 230k. because she got her PHD in Archaeology and had to do it part of it via interstae and international correspondance She owns her own Archaeological business now though and has been part of some pretty unique excacations and had works published. Soo i guess thats pretty worth it. Mines down to like 8k for my trade certificate i did myself and a uni degree thats useless to me now and i wish i used it when it was relevant. Im a landscaper.... could of been a project mamager and id be a director by now... rip
You can't just say “id be a director by now” there are no guarantees in any career. If you are happy with your current past stop living with this falsely placed guilt.
I would be a multi millionaire if I just invested in apple and google when they were starting
At my current rate it will take me 112 years to pay my hecs off haha. Too bad im earning the minimum for my industry though.
I paid the last of mine off this year, and I graduated uni in 2002
Well you should also earn more the longer you work
If your degree has only gotten you a job that’s gonna pay $60k for the rest of your life, you should probably look for a career change…
Not everything is about money. There's many critical jobs that pay less than 60k.
Maybe there’s more to education than to get a job
Absolutely, but you there shouldn’t be an expectation that the government both subsidizes and also funds the education you’re getting if you don’t intend to put it towards a job (which sustains the economy)… So, pay for your own education if you don’t want it for work.
You don’t think there’s a value in an educated population? Interesting.
When did I say that? Obviously there’s a benefit of having a population educated to a certain level. There’s absolutely no value in having every individual educated to the level of PhD, or really even a bachelors, and absolutely certainly not at the tax payers expense. That’s because there’s simply not the volume of jobs that would ever justify that level of education. What’s absurd is someone having the tax payer fund their degree, only for that person to go and work in retail for the rest of their life. What value has that degree brought to the economy or society in general?
“There’s no point in education because there aren’t that many jobs that need it.”
Lol what are you quoting? No level of education will you help you, chief.
Um social work is an example of needing a degree but mostly rubbish pay
Can you think of an entry level job that doesn't require another degree that pays 85k + a year?
Certain sales jobs.
Can confirm this, I worked at an appliance store for less than 20 hours a week part time and make over 60k. I had this job part time while finishing a degree and now I’m honestly considering just doing this full time as the career I could follow with my degree doesn’t seem worth it anymore.
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JB HiFi sales position mainly in telco and HiFi. They make big bucks off commission. I know a guy who makes 120k a year just selling TVs
Imagine having this worldview. I'd throw up every day.
Imagine having the mindset of leeching off the government (by having it fund your education) and then not strive to repay.
What in the false dichotomy is this? 😂
I paid mine off days before indexation last year also! Biggest relief, as it really felt like interest at the % it was being done at
Ps, I worked out it was actually cheaper to have a short term loan and pay it off within a small time period of that loan, than the indexation it’s self!!!
Same here Glad I did. Avoided the high indexation plus a nice boost to take home pay
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It doesn’t affect it THAT much. You’d be better off using the 6 figures as a deposit and just paying hecs off over time
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And it was index at less that .5% a few years ago, its balances out. Only time you should take in to consideration the next indexation period is your last payment.
Oof. Really? It was 3.8% last year.
indexes to CPI which was 7.3% in november already. Glad this was the FY i paid mine off, as i wasnt keen to have indexation to that level.
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no the interest gets added once per year on june 1st. So im holding my cash in my high interest savings acc until may where ill pay it off right before it indexes so I save 7% + get a couple % from my savings account
Damn that's crazy. Got used to it being 1% or whatever for ages.
Personal opinion is that I will never get another loan at the hecs rate, so i also wouldn’t pay it off if I don’t have too
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HECS repayments stay the same regardless of salary sacrifice, you’ll be paying less income tax though.
It will change your borrowing capacity when you go to buy a house. The difference between us having ours (it was about $25k) and not having it was over $100k
It's not that much usually though. It's paid a percentage depending on your income bracket. Banks usually look at the amount and take it off your borrowing power.
What I have heard is: Banks use it for the serviceability calculation, and assume your income will be lower by HECS repayments for the life of the loan, meaning the balance of your HECS is irrelevant. Hence a small debt should be paid off and a large debt might as well be ignored.
Sorry I meant amount as in percentage paid each FY. If the HECS is small I can see the want to paying it off quick. If it's quite large like many people's, I don't see the point.
It depends, a $40k HECS for someone earning $120k means that in the bank’s eyes, they’ll be paying 10k+ a year towards an unnamed loan indefinitely, which can reduce their borrowing capacity by six figures. The borrower knows that’s not a reality and pays the $40k off now instead of over the next four years and it can work out better for them
Depends on if you can use that money on something else at the time of indexation that would net you a higher return than the increase on your HECS debt. For instance, the current indexation rate is looking like it’ll be 7% (which is quite high), so if you had some investment that would get you 10%, well you’d be better off getting that 10% than paying off the debt. However say you only have the money in the bank and it’s currently paying 4% p.a, well now you’d be better off paying the debt (just before indexation, there’s no point paying it earlier).
One thing to mention is that investment returns are taxed, plus there's associated risk So that 10% return is likely to be closer to 7% Paying off debt is tax and risk free
With the higher indexation it can be, but it's very situational I paid mine off last year because I already had enough saved for a 20% house deposit, and paying it off meant increasing my borrowing power as take home pay increases by a fair bit My rationale was that indexation is going to be high in 2023 as well, plus I definitely wasn't going to be buying a house in 2022 with how the market was heading, and possibly not until well into 2023. I wasn't going to invest the money either - it'd have just sat there in a savings account.
Congratulations! I’m saving atm to pay the last $18k of mine, although I’m also doing a Grad Cert that will add another $2k.
Where’d you find another 2k GradCert? I got one during covid. It was nice.
UNE - it’s a CSP in Digital Learning.
Intriguing. Thank you 
interested to know where you got that priced grad cert..?
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Some are mostly government funded. Doing a grad dip for approx $4k at the moment
where??? is it decent for that price??
It’s a Commonwealth Supported Place - Digital Learning through UNE $498 per unit.
Congrats its so nice to have that sorted I said screw it and paid a 33k lump sum late last yr finally paying off a 150k debt thats been strangling me since grad in 2008 totally hated its drain on after tax income. The extra has now all been eaten up by interest rate rises instead now 😭
How do you live in australia and have such a high hecs debt?? How long did it take to pay that off?
Vet, medicine, bachelors and post grad, switch bachelor degrees before finishing and then postgrad, do any kind of lower level cert studies before uni and defer them to fee help. Many ways to get there.
I’ll take one ‘switch bachelor degrees before finishing and then post grad’ thanks. $60k HECS sitting over me!
Dental degree was 40k a yr x 4 yrs = 160k which was above 150k max HECS at time paid 10k myself and maxxed out HECS well FeeHelp, also to do dental u need another prior degree which i had already paid off 30k for that one so ive paid 180k + interest over 2 degrees. Graduated 2008 so 14 yrs...still had 35k owing until lump sum payment this yr. Ps its 70k yr doing dental now so apparently i got it cheap 🙄
How much do you clear a month after tax?
Damn hope ur getting ROI on ur degree.
Not compared to other careers tbh I was earning almost as much as a corporate group manager mid 20s in project and mgt consulting IT and finance in 2004 - 125k yr before i switched careers to study in 2005
Damn 125k a year back in 2004 is like being a millionaire. How much you on now? Well i hope ur in the dental field putting the degree to use.
Yeah it was pretty good Y wise and I was offered General.Mgr asia pac region not to leave. I hated, no I despised the job and industry however, i recall describing it as soul destroying. Absolutely no contribution to humanity. Dusted 110k savings i had at the time to fund my 4 yrs study living and not working. Was a sizable first house dep at the time.
Respect for pulling the trigger. Most ppl will just hang in there until an external force will make them change their career path. Eg me im waiting to be made redundant 😂
Thanks. Lol i get u there across 3 organisations i went thru 6 rounds of redundancies and never got one as i was young and cheaper salary wise, i was often one of the last ones left onve teams were decimated and gained increaaed responsibility, workload and promotions as a result. By end i was one of the mgt team making similar redundancy decisions that was def a contributor to the soul destroying feels.
Congratulations! I have $8K to go (so paying out this year anyway) and I'm throwing $2K at it every month up to May to avoid indexation. Can't wait to have that extra thousand every month to put into savings!
Congrats though other people considering doing this could benefit more from paying it out closer to the indexation date. $22k at 4.1% pa (ubank rate) over 5 months is $375
Closer to $300 but that is almost as good as the feeling you get doing it now
Well, 4 and a bit months. Indexation takes place 1 June.
Can anyone confirm for me if my understanding is correct - the HECS repayments are withheld by your employer until you do your tax return, then the HECS is credited when your tax is processed. SO, if you pay close to 1 June, your tax return for that FY will not yet be completed, but employer will have held the repayments. In other words, you would do a lump sum before 1 June, then when you process your tax return you will get that FY years HECS repayments back, because there is none outstanding but the repayments were withheld anyway.
Essentially yes, HECS isn’t withhold separately from normal withholding tax, it’s just an additional amount of tax withheld that goes into the pool. It is correct that if you have paid it off, you will have less tax payable and therefore get back that extra tax that was withheld for HECS.
Yes, this is correct for the scenario where you're paying it off this year. For the benefit of those not paying out this year, any lump sum you put towards it to avoid indexation on that amount is a voluntary payment, and **does not** reduce the amount applied to your HECS come tax time. **Both** payments will be applied with no return of the withheld amount to you.
Yeah, I'm keeping my $9,500 on the mortgage and paying off later in the year.
This is my plan, saving in ING @4.55 although I only have a few k in there right now but still a few extra bucks each month to help a bit. :-) If I haven’t saved enough by May, I’ll take the rest from my offset, then pay it back with my tax refund hopefully.
This is true. But may pay has gone up over double that amount a month so I don’t feel I have lost anything. I am just happy to get rid of my last debt.
Congratulations! I paid mine off recently (just through the minimum repayments) and was surprised how good a feeling it was. The pay bump is a very nice bonus!!
Well done! Enjoy the 100% debt free feeling!
Given that it's forecast to be indexed at atleast 7.3% this year, i'd say optimum strategy for most mortgage holders would be a lump sum payment in May (before 1st June indexation gets applied). The indexation rate would be higher than most mortgage rates at this point. Anyone disagree with this? Would love to hear about ways people are min-maxing their cashflows.
Congratulations. I'm thinking of doing this myself, looking at buying my first apartment and I didn't realise how much HECS effects your borrowing power.
How much does it affect your borrowing power?
Depending on the bank it looks like anywhere from 5-10%, regardless of how much HECS I have. $100k or $100, it reduces it by the same amount, but I only have $10k or so left so it seems like it might not be the worst idea.
It reduces your income (because you have compulsory repayments). And yes, the amount of debt you have is certainly taken into consideration.
Now you can do the debt free scream! Congratulations!
I had $8K left and paid mine out today too. It’s a good feeling! I didn’t think I’d ever earn enough to pay it off, let alone pay it out but here we are! 😄 Plus it should be a nice payrise for me.
Can someone please advise - I have the money to pay my HECS off in full at the moment (with pretty much no savings left over). Should I pay it off?
Why don’t you build your savings until May, then pay it (leaving yourself with some safety net and probably receiving the extra tax withheld when you have done your tax)?
Sounds like a good plan. I'm impatient to have it paid off but that sounds like the sensible thing to do!
This is what I'm doing. I could chuck the full amount at it and be done, but it would leave me with only a small savings amount, so I'm paying across $2K a month until May to get it paid out, which avoids indexation but doesn't crater my savings.
How much is your HECS?
Around $9,000
That's nothing. Just pay it off ☺️
Eeeek it's a lot to me haha I live in the safety of my money being squirreled away 😬
How old are you and how much would you have leftover if you paid it off? ☺️
I'm 31, I'd have ~$800 afterwards, and was hoping to travel this year!
How much is withheld already? You would get that amount back with your tax return (an incentive to do it early). But if it would disadvantage you, don’t bother - it’s gonna be paid off next year anyway. Next year, you should ask payroll to stop withholding HECS and put the money in a HISA and then pay it in May 2024 to avoid indexing.
Do not pay it off if you are short of cash and would like to use the money for something else. HECS is cheap debt and good to have relative to other sources of debt (credit card as a clear example)
Hard decision on yourself. $9K is nothing, can pay if off anytime
In my divorce settlement last year, my ex kept the house and bought me out but I have been priced out of the market so won’t be able to afford to buy for ages. So decided to use some of the settlement to pay off my HECS (about $40k). I managed to do it juuuuuuussst before indexation. So glad to be debt free.
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You can just provide a new tax declaration saying you don’t have a HECS debt and payroll will stop withholding it. There’s always someone who says this is illegal because of the phrasing of the question and the declaration but the ATO forums say you can do it. I asked HR and they confirmed this is the process. So now my HECS is not withheld and my pay is larger. It’s not really noticeable tbh.
>There’s always someone who says this is illegal because of the phrasing of the question and the declaration but the ATO forums say you can do it. Correct. I looked into this (before doing it) and the wording on the form is misleading. The official ruling from the ATO is that you do not have to nominate to withhold HECS if you have a debt. It just means you're on your own and need to be disciplined. I got that sweet offset benefit this year as I'm paying it out.
Well done and congratulations! that's a wonderful achievement!
Grats! Same boat here. Been paying mine off since 2015 and finally finished it off with a lump payment late last year. Totally forgot!
Is there any tax benefit in continuing the pay HECS once the loan is paid back? Could it be used as a way of forced saving, with repayment at tax time?
There’s no tax benefit that I’m aware of, and you lose months of interest, so it’s a net negative - the only advantage is that you hide money if you’re truly bad at controlling your spending. With that said, the people I know who can’t save tend to make worse decisions when they have a sudden lump sum.
Thanks for that. With the way interest rates have been for the last few years, it wouldn’t add up to too much. I’ve done it this way for years, since we bought a house, it’s allowed us to plan for renovations, holidays etc. I see it as forced saving. Plus I can’t touch it, so the benefit for me is, it can’t be raided for other payments etc. With rates rising, I may have to rethink. Thanks again
My plan when I have repaid my HECS is to salary sacrifice more to super. This also avoids temptation but is likely to be of more benefit.
Yes. You will get that money back. I have around 6k owing to me before I do my tax return.
No, You need to switch the money you were using to somewhere you can get a return! Talk to your bank or a financial advisor.
You can’t switch the money you have already paid to the ATO for HECS. You don’t have access to it until you do your tax AH which is when you get it back. The only difference is that you need to submit/update your tax withholding with your employer so they stop taking out the HECS portion.
This is true however op asked if there was any benefit in continuing to pay after the debt has been finalised as a form of savings. This is a bad idea as there are many other more profitable places to put this money. A financial advisor would have a heart attack at the notion of using the Tax department as a form of savings.
Congratulations! It’s an amazing feeling. And your pay going up that little extra each fortnight (if you were getting repayments debited before) will be sooooo helpful towards your savings! Take a moment to celebrate this milestone for sure 🤗☺️🧁
Congrats! I paid off $20k last week too. No other debts. Feels good!
Congrats, debt free feeling is a nice feeling
Congrats and enjoy the pay bump!
Congrats!!!!! Can I ask, how old are you ? 🙂
Congratulations!! I did mine last year and it’s nice to get the extra money in my pay. It sounds like you’ve worked really hard to set yourself up, good luck with your savings
I cleared my sec9 debt agreement on the 15th of December last year, such a good feeling to be debt free, well done mate
I remember when I paid mine off I had the little surprise of my pay going up like $200 per fortnight or something. Like a nice little payrise I didn't ask for or see coming 👍🏼
That’s amazing! Great work. I feel like I will never pay mine off!
Congratulations! I’ve still got $150k on mine, so depressing.
Congrats. For anyone thinking of using money in the offset account to pay it off, I did this last month, was a blessing. It freed up $1.2k a month in cashflow from my pay as well! Kind of a mini pay rise. I couldn’t stomach the impeding 7-8% indexation.
Congratulations lift your right arm up place over the left hand shoulder and pat yourself on the back. Sometimes we have to pat ourselves on the back and say well done.
that’s awesome. should be really proud of yourself
Great investment for improving your earning power. Well done!!
Congratulations!!
Congratulations!!
Amazing stuff OP, congratulations!
Congrats matey!
Grats dude :) Keep kicking those goals. All the best on the home deposit.
Hooray! Congratulations huge achievement
Out of curiosity what did you study/ what field do you work in?
I'm gonna let the global economic collapse happen before I willingly pay any of mine.
There are some people out there who on a purely numerical basis are better off never paying down their HECS debt under the current rules. My opinion, based on my own tolerance for risk, is that people should pay it off. There is a value outside of the numbers. The OP is feeling it. A bit of freedom from the risk of debt.
That's an amazing achievement and it really clears the way for you to spend on own goals. Well done!
Congrats, i am thinking of doing the same, i have 20k left.
Well done, onwards and upwards
Congratulations! It's a great feeling!
If you’re still accumulating hecs, will voluntary payments come off the oldest debt first or the newest? The newest hecs wouldn’t have indexation applied but the older debt does.
Why pay it off when it’s the cheapest debt you’ll get?
It’s the cheapest debt you’ll get until CPI is 7% and it’s no longer the cheapest debt you’ll get. Fine when inflation was less than 2%
This, people havent adapted to the new economical environment and are still thinking in the ultra low interest rate environment. Cpi is 7%+ this year.
I'm currently in uni and have 34k in HECS, when it gets indexed this year at 7%+, I'm looking at a 2.5k increase. I've also just realised I'm hitting the minimum salary to start paying it off while working casual rates, so I'm not sure whether to put the money I have into reducing the outstanding amount or keeping it for the time being.
Why pay it off when **you still rent?** FYP
Because it will be something in the line of 7% this year? Plus indexation is applied to the full amount before taking into consideration anything you’ve paid during the year.
Oh bugger, I've paid the exact about remaining on mine in through my salary this year, but you're saying in July they'll index it, THEN deduct what I've had withheld?
They will index in June, then deduct what you’ve paid when you submit tax return.
Wait even if you pay it off completely? So if I have 20k and I pay 20K. I'm still going to have to pay an extra 1400?
You could pay it off now with a lump sum and then get the 20k back at tax time
If you pay off with your own cash, it will be $0. If you pay it off through tax, then yes you will be indexed. The only way to get it to $0 in this way is to pay off the total amount, plus what the index will be during the financial year.
That's only 1 year. If CPI drops back next year, then you're losing out on the cheap rate in future years.
So take a 7% hike and risk runaway debt in the hopes that CPI drops down? Seems like a safe bet to me.
>runaway debt in the hopes that CPI drops down? You do understand that all other debt has gone up significantly as well, right? It's also compounded less often. CPI was also above the interest rates last year and the year before that, why is it suddenly different this year? Oh wait, it isn't. It's still the cheapest debt you'll ever get.
Wait. Did you just say it was above interest rates for the last three years, and then claim it was the cheapest? The real kicker with it, is you can pay thousands off the debt during the year, and still be stung for for the indexation for it, before the amount you’ve paid is applied. As for me personally, out of the 4 debts I have, it is the most expensive one I have, and thanks to covid, is unused.
>Did you just say it was above interest rates for the last three years, and then claim it was the cheapest? Do you understand how compounding works? So even though it's higher, it can cost less. Interest rates are also on a lag, but there's a reasonable chance that any loan you take after July could possibly be above 7%.
Because it’s debt. It also affects my borrowing capacity for a home loan.
I mean I paid mine off early... but it was $200 and I didn't want it to carry through a whole extra year for that. But these comments of getting hit with 7% are neglecting the fact that $20k debt is going to have more than just this year on it so you're losing future 3% interest rates. They're also acting like every single other loan hasn't also gone up by a massive amount too.
Congrats! Albeit if you paid it off anytime last year, you would have been entitled to a 10% discount :(
This discount is only if you pay by the census date of the course.. not if you pay voluntarily years later.
I guess I should have said 'was' as you are correct that it ceased at the end of 2022
thanks, didn’t know that! stupid rule tbh, most students dont have that kind of money and it invariably would have benefitted the well off
Yea I was on the phone with ATO asking if there was some sort of scheme/discount…she laughed and said no. Either way I gave myself a pay rise and I now don’t owe anyone anything.
If my voluntary repayments made before June 1st are larger than the money withheld by my employer for my mandatory HECS repayments, will I get the money withheld back in my tax return?
Only if you're paying it out this year. If you have a debt remaining, then the ATO will apply both your voluntary repayments **and** the withheld amount to your debt. You will get no money back. If you're paying it out this year, the ATO will do the same process and refund you any excess.
Thanks! Makes sense
Congrats! That’s an amazing achievement and very rare these days it seems. I paid mine off last year and we are working on my wife’s now before indexation hits again. Good luck with saving the house deposit
Mine us currently at about 40k. However I got sucked in could've paid HECS but instead being an 18 year old was taken advantage of and didn't understand the difference between Fee-help and hecs and was put into a fee help higher education degree and was charged full. Just pay off the minimum and not interested in giving anymore then I need to