Anyone else who was blind-sided by the HECS/HELP interest rate changes?
I guess I'm stupid. I didn't realise they changes the interest rates on HECS. Is it true, you basically should pay it off ASAP because the interest now is massive (I think it says 7% on mygov). I always understood HECS was almost interest fee so I just left it for a long time. Now I'm desperately trying to pay it off quickly so I don't have the compounding debt.
The way HECS is indexed is based on inflation rates. They announce the amount it will be indexed in early May (though you’ll be able to find out pretty accurate estimates as far back as March), and then apply it on 1st June. As long as you make whatever payment you want to make before 1st June (try to aim for no later than about 20th–22nd May, to make sure the transaction goes through in time) it makes literally no difference when you do it. Pay extra today or pay it on 15th May 2024, it’ll have the same effect. Except that if you pay it today, you’ve lost that money and it’s no longer earning interest for you in the meantime.
It’s not interest it’s indexation. It’s tied to inflation. If you knew about it then it was easy to see coming, but obviously if you didn’t then you didn’t.
It is possible to index negatively and reduce the balance but pretty unlikely with todays economy.
It’s applied once per year at the start of June so any voluntary repayments are best made before the last week of May. The repayments you make through the year as wage deductions aren’t put against your balance until after you do your tax return.
Thanks yeah, I haven't been in Aus in many many years, so haven't been following it. Do they release next years rate before it goes into effect? Like, would it be best to wait to see if the ~7% goes down and therefore it is better to pay back if it's predicted to go down the following year? Or does each year compound and can only go up in what I'll owe? And yes, I really don't understand how these things work very well.