Facts about repaying HECS debt

HECS debts – To pay or not to pay?

Generally speaking, the HECS-HELP debt is a pretty inexpensive form of debt. HECS-HELP debts don't attract interest, but they are indexed to inflation. The rate is based on the consumer price index (CPI), a measure of the cost of living.

In the past, the indexation rate averaged about 2 per cent — roughly half the rate of the increase in 2022 which is expected to be about 3.9 per cent. The indexation keeps the debt the same value in real terms i.e. after inflation.

When working out whether you should repay your HECS-HELP debt early, keep in mind that the HECS-HELP debt is flexible. If you lose your job, for example, you won't have to make repayments. Whereas if you have a car loan, a mortgage or a credit card debt, you will have to keep paying regardless - the repayment terms do not change.

If you don't have other debts, and you have some surplus cash, it's important to weigh up repaying your HECS-HELP with other options. If you're paying it off, you've got a guaranteed return of 3.9 per cent, but there's no ability to redraw, there's no prospect of achieving any long-term growth, and there's also no tax saving.

• If you're saving for a house deposit, it might make sense to prioritise that over repaying your student debt.
• If you're trying to boost your retirement savings, you could consider adding the money to your superannuation instead, which could reduce your tax bill.
• Keep in mind that if you're saving for a home, you can also withdraw voluntary super contributions under the First Home Super Saver Scheme.
• If you own your home, it's important to weigh up the benefits of repaying your HECS-HELP debt early against the option of repaying or offsetting your mortgage.

Most importantly, speak with a trusted family member or your accountant about your individual circumstances when making your decision.

How can a financial counsellor help?

Financial Counsellors help people who are experiencing financial difficulty. They are skilled professionals who will guide you through your options and help you plan your way out of debt. They may be able to assist you by:

• Doing a full assessment of your financial situation, including regular income and expenditure, assets and
  liabilities, to help you fully understand your position, create a budget and put a plan into place
• Providing advice on how to negotiate with your creditors, government agencies or other providers
• Negotiating directly with your creditors in certain circumstances
• Providing advice about what options, rights and responsibilities you may have
• Referring you to other services you may need, such as legal services, crisis food and accommodation
  services, and health services

What can a financial counsellor provide information about?

They can provide information and advice about:

• Credit and debt-related matters
• The rights of debtors
• How to lodge complaints with various ombudsman schemes if you feel you are not being treated fairly and
  whether you should have been given a loan in the first place
• Working out a realistic payment plan for debts
• How to access other specialist support services, including gambling, family support, personal counselling,
  legal aid and emergency relief

It’s then up to you to make the decisions about how to manage your situation with the advice you’ve been given.