New HECS Indexation

cpho on 02/06/2014 - 12:07
Last edited 02/06/2014 - 12:23

A little bit late to the budget party, but I was linked an article by a friend today, and I was curious where the media are pulling it's numbers from.
My main topic addresses the following quotes from the article

From June 2016, the Federal Government wants to change the rate at which all higher education loans are indexed, meaning the effective interest rate would go from CPI to as high as 6 per cent.

and

HELP debts will be indexed by the Treasury 10 year bond rate (to a maximum of 6.0 per cent per annum) rather than the Consumer Price Index (CPI)

It says as high as 6%, which would imply that it is capped at 6% right?
Then I kept looking, at the 10 year government bond which HECS will be pegged to.
Shock horror when I found the bond yields at 3.65%, compared to the current CPI of 2.9%. Which means at the moment, there is only a 0.75% increase in HECS fees. Someone correct me if I'm wrong here.

Anyway, my HECS debt will be around $30k when I graduate.
I'm going to cut corners and make stupid assumptions like the 10 year government bond will always be 1% above CPI, and that I won't find a job which pays over average income for 5 years, and that I'll pay the HECS off all at once
Punching the numbers out,(30000 x 1.01^5) over the 5 years, I'll have to pay $1530 more than what I would've paid pre-budget. This comes down to $306/year.

Of course this isn't taking into account the stupid increase in Uni fees (which I agree is terrible and I'm hoping it won't pass the senate) and other factors, but I don't see the point of all this media puffery over the small HECS increase. Unless there's some point in this policy that I'm missing? I should probably point out I haven't read the actual budget :) This is just what I understand from the media

Yes yes, all the Labour die-hards will have a cow over this post. I should mention before I get negged into oblivion (on a forum post :D), I'm neither Liberal or Labor. I'm just trying to put things into perspective.

Tl;dr, Am I missing something from the new policy, and if not, why are people making such a big deal over a less-than-1% increase to HECS?

Financial

Comments

      • Baghern on 05/06/2014 - 08:56

        pay it off, and get the 5% discount.

        Unless you have some sure fire way of getting higher return..

        • Malarkey on 05/06/2014 - 09:00

          Well 6k of that is going into my FHSA before the end of the month to get my last 17% contribution, after that I'll pay it off I think

    • p1 ama on 04/06/2014 - 16:11

      Not every graduate is going to be able to get a job.

      I honestly think if you can't get a job then you're the only one to blame.

      1) If you graduate with an average in the 50s or 60s and start jumping up and down about not having a job, then you should have worked harder when you were in uni.

      2) If you knowingly go into a field which is in oversupply and when you graduate, you can't find a job…well that's your fault as well.

      That's the whole hard truth of it all, to be honest. I'm not a supporter of the Coalition's proposals, but I really do think if you've spent 3+ years at uni and you don't end up with a job, there's something wrong with you.

      • edgar28 on 04/06/2014 - 18:02
        +1

        Academic is a must, doesn't mean will make you successful. extra curriculum is important.

        I knew someone got a 1st class honours and he couldn't get a job vs a so so result student which is active on other stuff, charity function etc……

        But what the above said is true, if you couldn't get a job, it's your fault. I started off lower than my degree qualification, and slowly promoted up the rank(or quickly….. 3 promotions in 3 years, 1st one was 18 months) .

  • gccmelb on 04/06/2014 - 13:32
    +1

    Joe Hockey and Tony Abbott got free degrees!

    I have scientific degrees and I don't exactly make the most money in the world, so this change will really effect me over the long run.

  • Nuggets on 04/06/2014 - 13:52
    +3

    The silent minority with regards to the changes to uni fees and HECS is permanent residents.

    They do have access to CSP, but not to HECS - meaning they pay every semester upfront.

    This is going to be astonishingly difficult if the annual fee is ~ $15-20,000 per year. At the moment it hovers at around $9,000 per year, depending on your course.

    $9,000, you could feasibly earn working part time. Difficult, but not impossible.

    $20,000? Sorry mate.

    So while everyone is having a whinge about the change to HECS indexation, at least you're still getting HECS! Think about the poor buggers who have to pay it all off straight away.

    • TintyJ on 06/06/2014 - 09:47

      think of the poor buggers that get free eduction!

      • edgar28 on 06/06/2014 - 10:39

        you reminded me that there is one guy attend school just to get support money. over 30s, always attend the school…….. and sleep, fail for many years……

  • [Deactivated] on 04/06/2014 - 13:55

    I don't mean to hijack your thread, but I was just wondering if the higher degrees by research (masters and PhD) are also affected by the new budget? The research is currently being completely funded by the government for Australian Citizens.

    • zzzsianzzz on 04/06/2014 - 17:19

      i believe most/all PhDs are on scholarships? I dont think they are affected unless they cut the fundings for Uni and the Uni cuts the scholarship numbers?
      I think Masters level are using FEE-HELP and less HECS, dependent on your course too?

      • [Deactivated] on 04/06/2014 - 18:21

        @ZZZsianZZZ

        You are correct about doing PhD for Australian Citizens being free (Australian Postgraduate Awards). It has also been the case for Masters degree BY RESEARCH (and not by Coursework where HECS is concerned)

        However, I am worried that Australian Postgraduate Awards also get cut…

        • zzzsianzzz on 05/06/2014 - 03:39
          +1

          if you have an education loan from government, then yes, you should be worried if it passes to become law. If its awards/scholarship, they haven't touched those from what I have read, They might reduce it without much warning for research funding allocations though as it doesn't affect the mass student majority. And also Uni wins funding from government through research topics, government provides subsidy to a portion for HECS students, but main source of income without research funding for regional uni/top uni comes from international students paying full tuition fees to make up the balance. regional unis are more concerned about this issue as they might end up charging lesser to attract more students to their uni.

          The collateral damage on HECS are increase in tuition fee debt/loan to a higher rate instead of CPI and that top Aus unis have the option of increasing their fees once the cap on tuition fee is also removed. Unis will be free to increase it to what they think is "reasonable" or might match it with top unis tuition fees, price match guarantee for uni might happen. too much ozbargain. :x

          if the course is not eligible for HECS, students can only use FEE help with certain restrictions, there's not much subsidy as much as HECS at masters level anyway. those on fee help will also have similar worries but i think the duration for masters level are shorter *at max. 1-2 years) excluding PhD, higher tuition fees (due to uncap) with higher debt interest rate.

      • Pacify on 06/06/2014 - 17:18

        There is not a lot of people who are crazy enough to do a phd without a scholarship. There are a few tho, but jesus that would cost you a to

  • Grent on 04/06/2014 - 22:25
    -1

    What, a heavily discounted loan on a small portion of your actual uni fees? Boo hoo
    No minimum payments if you're unemployed or earn under the threshold. Its a tough life!

  • mnypwrwmn on 04/06/2014 - 23:58

    What's going to happen when a future government of ours decides to remove the 6% govt bond cap and it increases to 15% (pending market numbers). There will be pandemonium in the streets!!!!

    • tohara on 05/06/2014 - 10:52

      in that case you would just shop about for the cheapest loan you could find from a bank to pay it off

  • Baghern on 05/06/2014 - 08:58

    This is a bigger reason for people to get an education here then work/live overseas… its already happening

    • tohara on 05/06/2014 - 10:52

      Not really, because the debt will continue to grow indefinitely

      • lplau on 05/06/2014 - 12:20

        I believe you don't have to pay it off though unless you start working in Australia.

        I have heard of dodgy people who rack up a huge HECS debt and then use a credit card to pay it all off, then file for bankrupcy though.

        Obviously those people don't think, as they have tainted their financial history, and doomed themselves for life.

        • edgar28 on 05/06/2014 - 12:58

          7 years……

        • LeChocolateMan on 05/06/2014 - 16:46

          7 Years which they may just spend overseas, and return to a normal life.

        • tohara on 05/06/2014 - 17:37

          you only ever pay off your HELP (unless you make a voluntary payment) when you lodge a tax return and are above the threshold. So yes you need to work to pay it off, but its starts indexing from the first dollar you incur.
          I haven't graduated yet but its been indexing for 4 years already

          Bankruptcy sounds like a terrible idea. You're stuck with the inability to finance anything for the rest of your days

        • edgar28 on 05/06/2014 - 23:53

          i recalled the law changed to promote bankrupt people back to work force to own something. should be 7 years.
          Used to be forever.

          That's why for the past 10 years there are so many underage bankrupt people……. some with petty 800 dollars debt……

        • Baghern on 06/06/2014 - 09:49

          Nick Darcy…

  • Eurasian on 05/06/2014 - 13:05
    +1

    The government is keen to justify changes to higher education (deregulation) by repeatedly mentioning the specifics of HECS/FEE-help arrangements. That is, pay only a certain percent once earning $50,000, a capped interest rate and so on. But at the very same time they've made it clear that they are willing to retroactively change these terms whenever they like. They seem to compare it to bank loans when it suits their argument, but in reality they are not comparable.

  • terlalu on 05/06/2014 - 16:19
    +1

    Here's the deal though - jobs are getting harder to come by nowadays. You almost need a university degree to secure even the most basic admin level job. So are people going to put off going to uni? No, because if you choose not to, sure you'd save yourself a $50k debt, but then you'd have a very hard time getting even an interview.

    Remember when uni used to be FREE and then everyone had an outcry like we are having now when they introduced HECS?? (yeh, neither do I) but the point is that everyone went to uni anyway despite education no longer being free. In fact, we are more educated that ever, and more and more people are getting degrees. The government knows this, so they can reduce their subsidies however they like. We are still going to go to uni, and we are still going to rack up debt because that is almost the norm nowadays.

    If you think of it this way:
    1. People will continue to go to uni.
    2. The total HECS debt continues to increase as more students borrow than what gets paid off
    3. Government doesn't want this debt and wants students to pay it off faster, so they increase the indexation for these loans
    4. We will cry and we will whine, but we will still continue to go to uni
    5. Government doesn't care because see #1.

    One way to get the government to listen up is to not enrol at uni. Then over a period of time, as HECS borrowing is reduced, the government will have no hand in maintaining high indexation as the total debt decreases. Then they'll have to drop it back to CPI index. But who loses out in this? school leavers and new students. Who benefits? Currently enrolled students and people with a HECS debt who will be back to paying CPI indexed interest. My evil ploy all along ^_^. Thanks.

    • LeChocolateMan on 05/06/2014 - 16:47

      There are many tafe/trade skilled jobs that generally end in self-employment and I must admit it is suprising what sort of income some of these people can generate.
      Seeing such things almost makes many people such as myself feel as though university education is pointlessly glorified for many degrees.

      • edgar28 on 05/06/2014 - 16:54

        yes, tradies…… earning whooping 180k compare to general degree holder of 45k

        I had encountered many cases, I paid for call out fee for a bore pump repairer, he came, told me pump is too old time to change new one , I was like……. it's less than a year old……..

        then second one, saying pump is not faulty, happy news? no….. stated bore run dry, drill new hole cost 5k.

        3rd one came in, pump faulty, change a few things, running fine………

        standard call out fee for 135-155, just check and tell you couldn't be repaired. Easy money.

      • terlalu on 05/06/2014 - 17:00

        When the budget came out, I noticed that we are going to cut foreign aid. I thought hang on, that can't be right, we got to help the poorer nations. But then I thought about it some more and decided that yeh ok, we got to look after ourselves first, maintain our economy so that we'd have more to give later on. But then on the way back from work I see a young P-plater tradie tearing down the highway with his brand spanking new v6 commodore. That's when I decided, nope we're pretty well off. We'll be right.

        I mean all credit to him, but makes me wonder though… as I continued to drive home in my mid-90s corolla, maybe I'm in the wrong career…

        • edgar28 on 05/06/2014 - 23:56

          the foreign aid reduced from 13B to 8Billion…… and can anyone confirm the money is in good use?

          saw from newspaper the one of the agent who manage the fund have 10 properties in Queensland….. when interviewed where he get the money from? he said "isn't it obvious? it's the Bank!"

  • Pacify on 06/06/2014 - 17:16

    That's some awful assumptions and maths, are you sure you are a uni student~!?

    You havn't taken into account compound interest or long term bond yield averages….

    Surely you could spent the extra 2 minutes and posted something sensible?

    • p1 ama on 06/06/2014 - 18:08

      I completely agree, with the calculations OP has made in his initial post, no wonder university graduates aren't finding jobs.

  • Pacify on 06/06/2014 - 17:29

    Seriously, if Abbot is able to get this shit through without some serious modifications, I'll eat my hat. Either that or start hating Palmer with vengeance.

    They have no mandate for these changes, they did not utter a single word about it pre-election, even though it was clear that what they had already planned, given they started floating the idea of selling off the hecs debt (The debt is going to be worth an awful lot more now that its got a much higher possible rate of return)

  • Bretlyn on 07/06/2014 - 21:38

    Does this help?
    http://www.whatwillmydegreecost.com.au/

    not sure how accurate it is…

  • srhardy on 08/06/2014 - 15:52

    Steps to avoid the HECS trap(s)

    1. get degree on HECS
    2. move overseas and pay off HECS + 25k a year into SUPER as a contribution (the 15% tax might be offset with tax already paid OS)
    3. move back home HECS FREE and with money for a home…
    4. Retire, well off, no debt and with a house…

    easy… only an idiot would get a degree and stay here with it!

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