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Your HECS debt is going up next month. Here’s what I’m doing with mine


With a 7.1% rise for HECS-HELP balances in June, I seriously considered paying mine off early to avoid a $560 increase.

More than 3 million people have student debt, according to the Australian Taxation Office.

Balances range from under $5,000 to $100,000, so the 7.1% indexation rate will add hundreds or thousands to most balances.

My own HELP balance of $7,867.94 will increase by $560.73 at the start of June.

For an average debt of $24,771, the indexation rate will add $1758.74 to the balance.

This is the biggest indexation rate rise in 10 years, with most hovering around 2% in previous years.

And those lower increases are why I didn't think about my student debt much.

But when I applied for home loan last year, then a new credit card this year, the banks wanted to know exactly how much I student debt I had.

This made me realise hundreds of dollars was added to my balance each year.

And hundreds of dollars from my monthly income goes towards repaying it.

With the rising cost of living, there's good reason a lot of people are thinking about their student debt right now.

In fact, 1 in 2 (54%) Australians with student debt are concerned about repaying their interest-free loan according to a recent Finder survey.

The survey also found that 14% of people didn't think they would ever pay their HECS-HELP debt off.

Should you try and pay off student debt early?

If you're in a position to pay off your HECS-HELP debt early, you could avoid the 7.1% increase by doing it now.

It would also mean more money in your bank account each payday.

But there are other factors to think about first, as Finder reported earlier this year, including:

  • How much you have in savings
  • If you have credit card or personal loan debt, which both accrue interest
  • If you want to make new investments

In my case, I have enough savings to pay off my student debt balance.

But doing that would leave me with a smaller buffer for emergencies or unexpected costs.

This includes any more Reserve Bank of Australia's (RBA) cash rate rises, which have already added thousands to my monthly bills.

I've also got some essential expenses coming up in the next 1-2 months, including insurance premiums, rates and health bills.

What clinched my decision was the fact that if I paid my student debt off, I would have almost $8,000 less to cover other costs.

That's a lot of money at any time, and the rising cost of living also means I don't know when I might need to dip into my savings.

Once you've made a payment towards your HECS-HELP debt, you can't get it back.

And unlike other debts, the indexation rate on student balances is only charged once a year.

So, with all of this in mind, I decided to keep my money in savings – where I can access it when I need it.

The first step towards keeping up with the rising cost of living is to create a budget, reduce your spending and look for ways to save. A high interest savings account can make your savings work even harder.

Image: Getty Images

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