Urgent warning every Aussie with a student debt needs to hear as a critical deadline looms next WEEK that will hurt badly
- HECS debt set to rise for Australians still paying off their higher education
- Just under three million Aussies are set to be hit with huge repayment increase
- Indexation rate will climb to 3.9 per cent from June 1 – highest in 10 years
Australians yet to pay off their HECS and HELP debts are set to be stung with the highest increase in repayments in more than 10 years.
Monthly and annual payments are set to surge for the under three million Aussies with student loans from June 1 due to rising annual indexation rates.
The rate is closely tied to inflation, which rose to 5.1 per cent in the March quarter.
The new indexation rate is 3.9 per cent – vastly higher than last year’s 0.6 per cent rise.
Australians yet to pay off their HECS debts are set to be hit with the highest increase in payments in more than 10 years due to rising inflation costs
The indexation rate rise means the average HECS debt of $23,685 will rise by $1,013.
As a result, financial savvy Aussies may choose to start making voluntary repayments towards their debt to bring the total down and decrease the interest rate.
Pivot Wealth founder Ben Nash told Nine.com.au the indexation rate was concerning because it exceeded current wage growth.
‘When you look at it against the wage growth, which is annualised at 2.4 per cent, you can see that it is challenging at a rate higher than the growth in wages,’ Mr Nash said.
‘So it means that people are going to have to pay more of their salary to have the same impact’.
The indexation rate rise means the average HECS debt of $23,685 will rise by $1,013
He said the numbers shouldn’t discourage people from seeking higher education because its likely the indexation rate will average out to about 2 per cent over 10 years.
‘It’s only slightly positive because the cost is still going up, but the HECS increases are not as high as increases in a lot of other goods and services,’ he said.
A former student at University of New South Wales told Nine she was looking at contributing more to her $30,000 in debt.
‘I would only do that if it was strategic for buying a home you know, because I know that the banks take into consideration the repayments that you have to make towards that debt,’ Jasmine said.
‘I wouldn’t rush to throwing money at it, unless it was you know, for a very strategic purpose’.
Barefoot Investor however says Australian’s shouldnt’t even contribute a dollar in extra payments to HECS.
‘All the hoo-ha about the Government’s proposed changes to the HECS-HELP rules are focused on the compulsory repayments that come out as a percentage of your salary,’ the group said when asked about increasing voluntary payments.
‘In doing so the Government has all but given up trying to get people to make voluntary contributions — the bonus was scrapped from 1 January 2017.
‘So why would you bother rushing to pay off the cheapest loan you’ll ever get — it simply increases with the general cost of living — when it’ll come out of your salary anyway? ‘The answer is you shouldn’t.’