What the HECS happening?
Uni often marks a significant milestone for many of us alike. It functions as a fulcrum of personal growth, a microcosm of greater society where we surrender our weaknesses and envelope our strengths, and a time when we laugh a little louder and cry a little harder. However, if there was one thing that could universally encapsulate the university experience, it would be the imminent HECS debt that mutes the celebratory cheers on grad day and hazes the forefront of our minds upon entering the workforce.
My Roman Empire for the next four years.
What is HECS debt?
HECS/ HECS-HELP, an abbreviation for Higher Education Contribution Scheme, is an interest-free loan that provides external aid to students for tertiary higher education. Unlike traditional repayments, once you apply, the government of Australia will temporarily subsidise the costs by providing tuition fees directly to your institution. Whilst some may choose to pay off their debt earlier, Individuals will only assume obligation for their compulsory HECS repayment once they reach a certain income threshold. For example, the 2023-2024 compulsory repayment HECS threshold currently stands at $51,550, which observed an increase from the previous financial year of $48,361.
The duality of HECS debt
Whilst this system has inherently relieved the financial burden of many students as they emerge into the professional world hyper-aware of the financial obstacles that pave the way, it also serves as a looming reminder that many of us will not achieve financial freedom until it is paid off in its entirety.
Ways to pay off HECS debt?
- Lump sum payments
Lump sum payments can be made at self-selected stages of the year via simple methods of transaction which may include, BPAY and credit card payments. Whilst this does provide individuals with added financial flexibility it demands a heightened sense of accountability and independence.
- Salary Sacrificing
Also commonly referred to as salary packaging or total remuneration packaging , salary sacrificing eliminates the randomness of when repayments are made, instead, it ensures that a fixed deduction is made to your salary. Whilst many deem sacrificing a portion of your salary and thus, effectively lowering your income as a detriment to overall good financial health in hindsight it serves as an added bonus by reducing your taxable income whilst holding you accountable for debt repayments.
Benefits of paying HECS debt off earlier
- Reduced debt burden
- Improved credit score
- Improved eligibility for government benefits (i.e. Austudy, Family tax benefit plan B etc)
HECS and our status quo.
On tuesday the 14th of May 2024, the Australian treasurer, Nicholas Chalmers handed down the federal budget 2024-25, wherein, one of the focal budget priorities lay in relieving student loan debt. The proposed cut of 3 billion dollars off the total HECS debt of 80 billion dollars is set to financially assist more than 3 million Australians nation wide.
This new framework seeks to overhaul the current student loan indexation framework by capping indexation in line with whatever is lesser of consumer price index (CPI) or wage price index (WPI). CPI measures household inflation and the cost of goods and services, whilst, WPI measures the price and composition of labour. For example, an outstanding student debt of $26,000 may be cut back by $1200.
This call follows an unprecedented 7.1% indexation rise in 2023, propelling debt levels to unfathomable levels. This budget decision is more imperative than ever, fuelled by ballooning inflation rates coupled with the passive crawl of minimal wage rises that render contemporary living almost suffocating for many.
By pursuing greater domestic relief, this budget will also provide Commonwealth Prac Payments of $319.50 per week to essential service areas of teaching, nursing and social work. This will alleviate ‘placement poverty’ for those who are required to complete a whopping 800-1000 hours of unpaid work.
Uni often marks a significant milestone for many of us alike. It functions as a fulcrum of personal growth, a microcosm of greater society where we surrender our weaknesses and envelope our strengths, and a time when we laugh a little louder and cry a little harder. However, if there was one thing that could universally encapsulate the university experience, it would be the imminent HECS debt that mutes the celebratory cheers on grad day and hazes the forefront of our minds upon entering the workforce.
My Roman Empire for the next four years.
What is HECS debt?
HECS/ HECS-HELP, an abbreviation for Higher Education Contribution Scheme, is an interest-free loan that provides external aid to students for tertiary higher education. Unlike traditional repayments, once you apply, the government of Australia will temporarily subsidise the costs by providing tuition fees directly to your institution. Whilst some may choose to pay off their debt earlier, Individuals will only assume obligation for their compulsory HECS repayment once they reach a certain income threshold. For example, the 2023-2024 compulsory repayment HECS threshold currently stands at $51,550, which observed an increase from the previous financial year of $48,361.
The duality of HECS debt
Whilst this system has inherently relieved the financial burden of many students as they emerge into the professional world hyper-aware of the financial obstacles that pave the way, it also serves as a looming reminder that many of us will not achieve financial freedom until it is paid off in its entirety.
Ways to pay off HECS debt?
- Lump sum payments
Lump sum payments can be made at self-selected stages of the year via simple methods of transaction which may include, BPAY and credit card payments. Whilst this does provide individuals with added financial flexibility it demands a heightened sense of accountability and independence.
- Salary Sacrificing
Also commonly referred to as salary packaging or total remuneration packaging , salary sacrificing eliminates the randomness of when repayments are made, instead, it ensures that a fixed deduction is made to your salary. Whilst many deem sacrificing a portion of your salary and thus, effectively lowering your income as a detriment to overall good financial health in hindsight it serves as an added bonus by reducing your taxable income whilst holding you accountable for debt repayments.
Benefits of paying HECS debt off earlier
- Reduced debt burden
- Improved credit score
- Improved eligibility for government benefits (i.e. Austudy, Family tax benefit plan B etc)
HECS and our status quo.
On tuesday the 14th of May 2024, the Australian treasurer, Nicholas Chalmers handed down the federal budget 2024-25, wherein, one of the focal budget priorities lay in relieving student loan debt. The proposed cut of 3 billion dollars off the total HECS debt of 80 billion dollars is set to financially assist more than 3 million Australians nation wide.
This new framework seeks to overhaul the current student loan indexation framework by capping indexation in line with whatever is lesser of consumer price index (CPI) or wage price index (WPI). CPI measures household inflation and the cost of goods and services, whilst, WPI measures the price and composition of labour. For example, an outstanding student debt of $26,000 may be cut back by $1200.
This call follows an unprecedented 7.1% indexation rise in 2023, propelling debt levels to unfathomable levels. This budget decision is more imperative than ever, fuelled by ballooning inflation rates coupled with the passive crawl of minimal wage rises that render contemporary living almost suffocating for many.
By pursuing greater domestic relief, this budget will also provide Commonwealth Prac Payments of $319.50 per week to essential service areas of teaching, nursing and social work. This will alleviate ‘placement poverty’ for those who are required to complete a whopping 800-1000 hours of unpaid work.
