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‘I simply settled my $76,000 funding’


While it seems like an unbelievable concept for the 3 million individuals that have a financial debt to repay, it’s bittersweet for those that have actually simply cleaned their slate tidy. Dan dug deep in 2014 to completely repay his $35,000 HECS financial debt in one lump-sum repayment. He informed Yahoo Finance that Labor’s strategy does not agree with him.

“I tried to be smart and paid it off in bulk to get ahead of the indexation, only for the government to step in,” the 29-year-old claimed.

“At 7.1 per cent indexation, you’re getting a better return than any fixed-income product.

“Now, it ends up I had not been ‘obtaining a return’ on my cash and I would certainly have been far better off car park it elsewhere. Imagine if a personal service attempted to draw that things.

“If these policies were announced back then, then there would be no reason to pay it down because at 1.5 to 2 per cent it is basically free money and I would have been fine just making the required payments.”

Between 2013 to 2021, the indexation on HECS was in between 0.6 percent to 2.6 percent.

Indexation takes place yearly and is connected to the customer rate index (CPI) to ensure that the funding equals rising cost of living. But Dan, like lots of Aussies, saw their HECS financial obligations take off from 2022.

That year the indexation price was 3.9 percent. A year later on it escalated to 7.1 percent, and this year it was 4.1 percent.

Do you have a HECS financial debt and have a viewpoint concerning Labor’s plan? Email stew.perrie@yahooinc.com

These raises included hundreds and even hundreds of bucks onto every person’s lendings, and, sometimes, they overtook the repayments that had actually been made throughout the year and left lots of back at fresh start.

Dan had not been alone in sensation rather annoyed by Labor’s statement.

“So I paid extra, cleared my debt, and those who didn’t use my tax dollars to clear their debt. Thanks, Labor I really appreciate it,” composed one irritated Aussie.

“Nah Labor can f**k off with that policy move. I literally dumped my savings to pay off my HECS completely just before it got indexed at a high rate a year ago. Are they gonna give me 20 per cent of my money back because I can financially plan? Nah. So f**k ya,” included an additional.

A 3rd mentioned: “Ugh same here! I kicked my chances of getting a home 3 years down the road to pay off the debt.”

“I feel pretty bitter here. I just paid off my 76k HECS debt last year when we had that 7.1 per cent indexation. That’s 14k I could haveâ€Ĥ feels pretty s**t to be responsible and use near all my savings only for the next year this to happen,” commented a 4th.

Not every person that is HECS-free were upset concerning the plan as they favored to take a look at the larger photo.

“I’ve already paid mine off, but I think this is brilliant for those who still have a debt. Every bit helps,” claimed a single person.

“Both my wife and I sacrificed to pay our help debts off, I’m happy others won’t have to for as long,” included an additional.”

There’s no denying that HECS loans have been weighing on Aussies across the country for years.

But the problem came to be specifically irritated complying with the 7.1 percent indexation, in addition to the increase in the cost of living.

Teal MP Dr Monique Ryan, who has been campaigning for changes in the HECS system, told Yahoo Finance student loans can have a huge impact on a person.

Independent candidate Monique Ryan speaks to voters at a polling booth
Independent candidate Monique Ryan has been campaigning for the government to change the way the student loan system works. (Source: Getty) · WILLIAM WEST via Getty Images

“The reality is that half of the people who get a HECS debt now carry it into their 40s and the unintended consequence of that is that it’s actually affecting much of [peoples’] decision making,” she said.

“It’s reasonable to ask people to contribute to the cost of that education when they’re able to but we didn’t expect that it would become such a millstone around the neck and then it would affect life decisions to the extent that it is now.”

She said she has heard from people who had put off buying a home or even starting a family because they’ve been terrified of never being able to pay off their debt.

Prime Minister Anthony Albanese revealed over the weekend Labor’s plan to wipe 20 per cent off each person’s student debt.

He said the pay-out aims to make the education system “fairer and affordable for every Australian”.

“I will always fight for every young Australian to have access to a good education,” he said.

“We’re already fixing indexation and today, we are going further by taking 20 per cent off student debt – for everyone with a student debt.”

About $16 billion in student debt is expected to be cut from all student loan accounts that exist as of June next year.

This will mean average HECS debts of $27,600 will be slashed by about $5,520 next year.

The plan to make “the system better and fairer” would also raise the minimum repayment threshold from around $54,000 in 2024-25 to $67,000 in 2025-26 and index it to keep it at 75 per cent of graduate earnings.

It would also shift repayments to a marginal repayment system in line with recommendations.

This means graduates would pay a percentage of all income above a threshold amount rather than a percentage of total income after a threshold is hit.

A graduate earning $70,000 annually would have their minimum repayments cut by $1,300, while a graduate earning $80,000 would get a cut of $850.

The relief would be applied to graduates earning up to $180,000 per year.

These policies are on top of the government’s plan announced earlier this year to change the way student loans are indexed. At the moment, it’s tied to CPI, however, it will soon be linked to whatever is lowest out of CPI and the wage price index on any given year.

Western Sydney University Vice-Chancellor, George Williams, said the proposed reforms were “extremely welcome” but warned they did not go far enough in addressing the cause of Australia’s “broken higher education system”.

“We continue to call for immediate action to deal with the root of the debt spiral problem,” he said.

“The system for setting student fees in the first place is broken and deeply unfair. Today’s changes do nothing for new university students facing inflated fees.”

Professor Williams called for “a commonsense and fair approach” to the cost of university degrees, some of which cost so much that students are “priced out” of following their dreams.

“The fact that a three-year Arts degree now costs $50,000 is actively discouraging some students from considering or staying at university,” he said.

“We need action on all fronts: student loan repayments and the overall cost of degrees.”

The opposition had a different approach to criticising the plan.

Senior Coalition senator Simon Birmingham accused the Albanese government of trying to “hoodwink” young Australians, saying it “isn’t real reform.”

“This doesn’t change the student fees that somebody who starts uni next year pays,” Senator Birmingham told Sky News.

“This is simply a cash splash from Anthony Albanese. An attempt at trying to corner or hoodwink an electorate ahead of an election from a government who has ultimately overseen the inflationary environment that has put so much pressure on young Australians and ultimately all Australian households feeling that inflationary pressure.”

It’s a big question to ponder, especially if you have a big chunk of change that could either go to your student loan or something else.

Financial adviser Helen Baker told Yahoo Finance it would wholly depend on your personal circumstances.

“If you are having to borrow money, for example, in order to pay that off, if the borrowing rate is at the 7 per cent mark that doesn’t make sense,” Baker explained.

“Are you breaking into an investment to do it? Have you got money sitting in cash doing nothing? Maybe in that case it does make sense to clear some off.”

Baker recommended people look at their plans for the next few years, including any plans to buy property or have a baby, and factor in how paying down their HECS debt could impact things.

“What tax bracket are you in? What commitments are you looking forward to? What things might change in your lifestyle going forward in the next few years? Look at all that together to work out whether it makes sense and how much makes sense,” she said.

Once you repay your HECS debt early, you also can’t get it back and use it towards other things, Baker noted. That’s unlike paying extra on your mortgage, where you can usually redraw some of it.

– with Newswire

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