HECS-HELP loans are generally considered to be the least significant debt to pay off as the loans do not carry interest like a credit card or mortgage.
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This year’s indexation is expected to be the worst in 10 years, as student debt rose 3.9 percent from June 1 — up from last year of just 0.6 percent.
What does this mean for your outstanding loan and should you hurry to pay it back?
Splashing with money
The indexation percentage is applied to the part of an accrued study and training loan that remains unpaid for more than 11 months.
Financial expert Richard Whitten said the annual adjustment is affected by the cost of living, which has skyrocketed this year.
“It’s been a pretty low jump in recent years,” Whitten said, adding that the pandemic, rising energy costs, war in Ukraine and rising interest rates were among the mix of factors influencing the rise.
While some students and graduates are alarmed about the walk, Whitten said it served as a reminder not to forget the debt.
“Keep in mind it’s a bit more of a jump than previous years,” he told 7NEWS.com.au.
“A lot of people don’t think about the costs when they’re in college and when they graduate.
“They don’t think about it until they have to start paying back, but it’s good to know that the debt is there and growing. Because inflation is high, it will grow faster than you think.”
University student Eloise Hartill, currently studying her Juris Doctor in Melbourneis one of those involved in the walk.
“This as my fourth of six years at uni. My debt is currently about $30,000 just from my student and by the end of this year it will be about $70,000,” she said. 7NEWS.com.au†
“The raise is very stressful for me because I already knew that I would already have to pay about $40,000 to get my degree, which is stressful enough.
“I think it’s being hit a lot harder because the COVID restrictions are allowing students to access fewer university resources and spend a lot of time studying at home or online.”
Although she knows she won’t have to pay off her debt right away, Hartill worries about the consequences this will have for her.
“I study full-time while living away from home so I can go to the best law school in Australia — I’m already struggling to support myself, let alone pay off my college debt,” she said.
“It’s something that has already occurred to me and the big increase just makes it worse. I worry about my ability to buy a house and have savings when I graduate at 24.”
Getting value for money
Nearly 3 million people with HECS-HELP debt will be affected by the increase, but Whitten said it was no cause for alarm and is rushing into repayments.
Recent data showed the average HELP debt balance was $23,686 in fiscal year 2021. This suggests that the average person’s debt would increase by about $920.
“If you have more, you have a much bigger debt, so 3.9 percent is a big jump,” said Whitten, who works as a home loan editor at comparison site Finder.
Despite this, he said student loans are still the “least urgent debt anyone is likely to have”.
“It depends on the person, but most financial experts would say, don’t worry about it,” Whitten said.
“It also depends on other debts – personal loans, home loans. Even if you have no real debts, but buy now, pay later, focus on that first.”
For those who have cash on hand, Whitten suggests thinking about increasing the amount paid out of your paycheck before closing.
“If you’re concerned or if you have a lot of debt, that’s something to think about,” he said.
“If you pay off a little before June 1, you minimize that debt. Some people benefit from that, but for most it’s more about the awareness of the increase than an urgent need to repay.
“If you do have some money and you could consider investing for a better return.”
It all comes down to your money personality and how comfortable you feel with debt, he said.
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