Dude, I’m HEXED!

Hello Scott,

Looks like I’m one of three million (presumably young) Australians pooping their pants about the recent announcement of a HECS index increase to 3.9%. I’ve got a whopping HECS debt of just over $53,000 (for my two degrees which currently see me sitting in a casual position earning $26.50 per hour). In the past you’ve advised to focus on other debts or investments, rather than HECS. Does this still stand?

Lina

Hi Lina

You’re right, inflation has increased the cost of everything, including the indexation amount on HECS.

In 2021 it was just 0.6%, this year it’s 3.9%, next year … who knows?

That being said, it’s still the best debt you’ll have: your repayments are contingent on your income and, while it is tracking inflation, it’s not attracting a commercial rate of interest.

Now I don’t have a full picture of your financial situation, but it makes sense to prioritise other (higher rate) debts over your HECS.

Finally, you need to look at your return on investment:

You spent $53,000 on your education and your (admittedly short-term) return is a casual position earning $26.50 an hour?

Now that is something worth pooping your pants over.

Scott.