As per title, here is seven more words to post
Anyone Else Scurrying to Pay off Their HECS Debts by The End of This Month to avoid 7.1% indexation?
Jaspa7 on 15/05/2023 - 14:22
Poll Options
- 37No, better places to put money (comment on what beats 7.1% in one month)
- 191No, don't have any extra money laying around
- 19Yes, will be paying off < 30%
- 12Yes, will be paying off ~ 60%
- 196Yes, will be paying off all of it!
Comments
where/how do pay off ?
You need to log into your ATO account. Payment details are in there.
https://www.ato.gov.au/Individuals/Study-and-training-suppor…
Further to Benoffie's response
Go to MyGov -> ATO (assuming you've got it all set up and linked)
On your main ATO page, there will be a "Loans and Accounts" section. Open and view your loan.
Scroll to the bottom and there's a massive "Voluntary Repayment" button.Would recommend BPAY, but it extra time to process! My test BPAY was quick at 1 business day (Sent Friday, Received Monday). But who knows once it gets closer to June 1st.
If anyone is considering a debit / credit card, be wary it attracts a %fee which can reduce or completely negate any saving one might receive, especially if they have a good offset or HISA set up.
generally BPAY before cutoff time on a business day will register on the account as paid that day - eg if you pay bills to say telstra, ato (BAS bills) on the due date before cutoff it registers as that same day on their systems.
If you plan to pay it off, better do it soon as 1st of June indexation of interest happens and then its a whole year before the next one
nvmnvm
Here is Barefoot response on this dilemma. In short as HECS is a income-contingent loan, he suggests to pay back any bank debt (that attracts an interest rate) first before you repay any HECS debt.
it depends on how long it would take you to pay off the equivalent in a variable home loan
for 12 month scenario (mean HECS around $22k, so entirely plausible to save that much in a year…)
7.1% indexation = 6.9% variable home loan compounding monthly (mines 5.99% with ING, no one's should be as high as 6.9%)so paying off HECS is 0.9% better off vs variable home loan (CURRENTLY, RBA could very likely raise again)..
and 1.8% better of vs HISA (BOQ @ 5.3%)caveat again, this assumes you won't be needing the money
yeah against a homeloan offset it probably wont mater too much but having cash sitting in the banks or shares for dividend you end up paying tax on that earning, so it a lot better to pay off with your spare cash.
also having hecs debt reduce your borrowing power, so it not too bad get rid of it before you take out a mortgage as well
I don't appreciate the Barefoot investor's approach as he tends to make unsupported statements instead of showing how you can adapt his advice to your own circumstances. I paid mine off in full this year because my investment loan has a lower interest rate than the index rate and the interest is tax deductible, my HECs is not. Everyone should sit down and do the math for their own situation.
I acknowledge everyone situation is different. The barefoot investor provides general information - very risk adverse information - which is helpful to the majority of people.
The take home point is HECS is only payable when you reach the threshold of $47,000 (1% repayment) and then increases depending on your income. So technically you don't need to pay if you don't earn enough, or are unemployed.
If you have enough 'savings' and have a steady job sure why not pay off the highest rate 'loan - hecs/home' first. But not everyone has the luxury to have savings/stead jobs to do so.
Just my opinion
What is the point of getting a university degree if you don't plan to earn more than $47,000? Surely you're intention should be to pay the debt back at some point rather than be unemployed just to spite the government.
@Mr Haj: Life can put some people in a situation to accept jobs out there that pay less than $47k, which will put you below the threshold for hecs/help payment
@Mr Haj: you use to be able to go off overseas and not pay, i think they have tried to tighten the loophole. I suppose you can change citizenship
highest rate 'loan - hecs/home'
what's this mean ?
@capslock janitor: whatever your highest interested/indexation rate is - put your savings money into that.
If you’re at a point where you are already earning over a payment threshold, and not reasonably expecting to quit or get fired any time soon… you can effectively disregard “income contingent” because you’re already there.
And on the other hand, if income is indeed expected to dip under the threshold: well, in that case… you’re basically broke. So you aren’t really in a position to be making extra repayments anyway, and this whole conversation is a bit meaningless.
Taking up the 10% discount to pay in full at the time of study was really worth it.
it was 20 percent in my day pre-Guilard who got rid of the discount if you pay upfront
Yeah I got the 20% discount for most of my degree and then 10% in the final years.
Never really understood the logic in the Govt removing that, it was a good way to encourage people to pay their degrees off, given traditionally borrowing costs were higher than the inflation the debts are indexed at.
You could argue that the 20% upfront discount unfairly benefited those who were in a position to pay upfront, that is, typically, students from wealthy families. I have no problem with students who are working full-time and paying upfront getting that sort of benefit but it seems that was not ultimately the group who were benefitting. In 2009, the rate of those claiming the discount from low socio-economic postcodes was only 12%.
The costs savings from removing that measure were re-directed into other increases into higher-education funding that year. In my view that is arguably a fairer application of the funds.
Loaded up on Coles Mastercard Gift Cards earlier this year and paid mine off with a near 7.5% discount.
You won Ozbargain
A true OzBargainer
How did you manager to avoid fees ?
I didn't. The Coles Mastercards are charged at 0.2% transaction fee when paying the ATO. A $250 gift card shakes out to $249.50 of debt cleared and a 50c fee.
damn, wish i'd seen this comment earlier. well done.
This is unbelievable
Were the cards discounted? Or do you get a discount for paying in card? How did this work?
You may be a genious!
Yep - the Coles Mastercards went on sale recently in batches around the country WA, SA, NT and QLD and VIC, TAS and NSW, ACT but I bought mine back in October 2022 when it was a nationwide deal because I had a fairly good feeling that HECS debts would be indexed by around 7%.
It was a 10% discount on the face value of the card + activation fee so $250 + $7 fee = $257 at 10% discount is $231.30 for a $250 gift card or 7.48% discount.
Then check the instructions here for using the Mastercards on the ATO portal and the Government EasyPay portal to clear any debts you have with the ATO.
I wanna know how many gift cards you used!
@capslock janitor: Not really honestly. I'll take a wild stab at August but that's entirely baseless and I wouldn't put any stock in it.
I do however reserve the right to gloat about it should the prediction hold true.
Sell bananas on roadside?
There's always money in the banana stand Michael
There can be better places to put your money without it being better just on interest rate.
such as?
I have a real dilemma; I am desperate to the HECS/HELP debt of my wife's and I prior to the 1st of June. Problem I face is the money we are planning to use to pay it doesn't settle until 30th June (Recently sold our house and moving overseas for a couple/few years for work).
From what I understand, I have no leg to stand on with any of the banks to get a loan of $90k (HECS debt amount for the 2 of us- we have double degrees) apart from asking a friend or family member for a 30 day loan (which I don't have available to me unfortunately) I am a bit out of luck and just miss the boat, unless any geniuses here have a great idea how to solve my problem to avoid the 7.1% ($6,390) indexation………….
Do I just suck it up and pay it?
Is there any other option that someone can assist?Appreciate all of you OzBargainers!!!!!!!!
Sounds like family/friends is your only option
Yeah, seems like it :( Are you a relative of mine with $90k by any chance hahahahaha
Bikies
got any shares you can sell? they settle inn 3 days
Unfortunately, I do not but would have been a good idea!
something to plan for the future always has emergency cash or liquid asset where you can access within a few days
you never know what life will throw at you
For crying out loud just pay it as you've been paying it forever - withheld from your pay. Forget about indexation - it's going to happen to everything. I don't see you going out and buying $90,000 worth of migoreng to hedge against the increase in cost of goods. I do not understand this mass hysteria.
Why are you paying it off early? If you're going overseas, will you still have Australian taxable income? Is there the chance you will settle overseas permanently? If so, you never need to pay it back
If so, you never need to pay it back
Nope.
https://www.studyassist.gov.au/paying-back-your-loan/what-if…
This is false.
Even if you're not an Australian resident for tax purposes, if you have an Australia HECS debt you are required to lodge tax returns as an overseas resident.
You put in the amount of overseas taxable income you earned and it gives you a bill for HECS.
simple smart money move nothing hysteria about it
you got cash in the banks earning 4.5% interest which you have to pay tax on which reduce it down to 3.5-4%
or paying off HECS debt which guaranteed tax free 7% return, equivalent to 9% grossit is a no brainer
Perhaps Citi credit cards Payall function could help with a portion
why
Do you really think the best thing to do is get a loan to pay 90k to save 7k? Like, how much more will you pay in interest?
I think you're in the boat of 'don't worry about it for now, go OS, work hard, make money and you'll know when you have enough to consider paying it off'
It was tough weighing up the options, but decided to pay off a portion of it. Literally just BPAY'd it before seeing this forum post.
Thought about paying more, or potentially all of it off, but with a kid on the way & some long planned house works. Thought it best to keep some in the kitty in case.
Luckily the kitty is offsetting most of variable part of the mortgage, with a decent chunk still fixed at a low rate for a little while longer. (Thank goodness)Hope everyone out there is doing alright~
Very similar situation here, thanks for sharing :)
How long have people's Beem It payments been taking? I sent through on Monday night but still haven't seen anything reflected as of this morning. Worried I may have inputted the wrong details.
BPAYed here, took 2-3business days :)
Via Beem it took mine about 2-3 business days. Did the last of it on Sunday and it came through today.
Thank you both - confirming it went through within 2 days for me.
Got the cash, but won't be paying off my debt as I'm still within the first "interest free" year. (Portion of the loan less than 11 months old does not have indexation)
Good call, re-assess next year, if indexation > variable home loan or HISA rate: pay off as much as you can comfortably afford
do you have more info on this?
how to checkI was wondering the same question as last years indexation is calculated on a different amount to what was outstanding. It seems you have to calculate it manually. It don't tell you how they got to the amount they calculated the indexation on.
keep in mind if you don't pay off the loan completely the indexation is based on the balance in the last 11 months so you won't get the 7% on balance paid
What do you mean “won’t get the 7% on balance paid”?
Are you sure about this???? pretty important point to consider
Good link. Thanks for sharing. Though your first comment is still confusing.
On 1 June each year, indexation is applied to the part of an accumulated study and training loan that has remained unpaid for more than 11 months, for:
https://www.ato.gov.au/Rates/Study-and-training-loan-indexat…
Oh right this makes sense. NEW debts picked up for courses studied recently are exempt from being indexed.
I think indexation is based on the balance on June 1*.
So voluntary payments made prior to June 1 will reduce the balance.
PAYG withheld prior to June 1 will not reduce the balance (as it is not applied until after June 30 when your tax return is calculated).
*not an accountant
This is correct.
Not very financially savvy, would anybody care to explain the importance of the indexation if you are still a studying student?
lets say you have studied 2 years of uni, usually it will mean 16 subjects studied full time if two semesters per year.
16 topic cost 20k hecs/help debt
20k + 7.1% = 21,420
an increase of $1420 in total hecs/help debt.
if you paid off 4k off 20k, then the 7.1% would apply on the 16k and not the 20k.
Life expectancy is only a few years, if I earn over $48k 400? dollars is a lot less than 80k.
when you die it dissapears so it doesnt effect any miniscule assets I leave behind. No point.
Great thread, interesting stuff
I still don't GAF tho, I'll take my hecs debt with me to the grave
The govt could tighten the rules one day to dig the money out of your estate. Nobody really knows…
No. The difference between the indexation rate and my mortgage rate doesn't justify the loss in liquidity and the other benefits of a HECS debt (e.g.elimated on your death, tied to indexation). In my case I think it's much better left off in my offset.
Correct me if I'm wrong but my understanding is HECS debt gets indexed on 1st June on any unpaid amount older than 11 months?
So even if you paid off your HECS debt in it's entirety before 1st June you'd still get indexed 7.1% on 11 months worth of unpaid amount at the time.
"
If I pay my debt off before June 1, will I avoid indexation?
Only if you pay it off in full via a voluntary repayment.But because they're processed at the time of your tax return, indexation will be applied to your balance before this financial year's PAYGW instalments are deducted.
That's because indexation applies on June 1.
Tax returns for 2022-23 can't be filed until after the end of the financial year on July 1 — a month later.
"Actually, I need some clarity.
I think you are confusing two different things here:
1. Clearing your balance via a voluntary repayment before 1 June - no indexation will be applied.
2. Clearing your balance via lodgement of your tax return. Since this occurs after the indexation, you’ll still get charged the indexation.For number 2, you are better off paying it in full before 1 June (if you have the cash), then get a big tax refund during tax time. It’s only a timing difference, and you get to save yourself from indexation.
Also note that it’s calculated at a point in time - i.e. based on the balance at 1st June. If you have $10,000 balance repayable at 1 June, then you’ll get an indexation charge of $710 (assuming a rate of 7.1%).
Hope that made sense.
Thanks - where did you find the info on it only being calculated based on the point in time?
Your explanation is very helpful. Kudos.
I didn’t have a choice as an international student so beside my 20hrs/week I worked 2 cash in hand jobs to pay my school fees upfront. That co-op year was magical as the full time job counts as school so i was allowed to work 2 jobs paying tax. my last year of uni I only had to work 1 job.
Just paid mine off. It was going to get paid off come tax time anyway (or at least get pretty damn close), so figured I’ve save myself a few hundred bucks and pay it off now, and get a fat tax return later.
I'll be doing this next week
u can get tax return for student loan repayments ??
?
@capslock janitor: They're referring to the withheld portion of their payslips, which would have gone towards the HECS compulsary payments.
Since they've now paid off their HECs, They'll get the withheld pay back once they do their tax return.
Does anyone know whether a credit card can be used to pay the debt off? If so, is it considered as a government payment and this ineligible for points. Are there any workarounds? Thanks in advanced.
@johnno07: Why do people that only speak 1 language have the most eye-watering goofy comebacks like yours? Back in my day this would get peoples' asses kicked on the playground, even by other monolingual kids. At least learn your own language so you can spot genuine faults instead of goober shit like this, ffs.