Have You Changed Your Mind on HECS?

Hi Barefoot,
 
My hubby has $85,000 in HECS debt, and I’m wondering what your thoughts are on the HECS-HELP debt saga. The Greens are trying to freeze the indexing to inflation. You have always suggested that we don’t rush to pay off our HECS-HELP debt because it’s an ‘interest-free loan’, but I am wondering if you still think the same way now.
 
Tania
 
Hi Tania
 
Look, I hate inflation like the Greens hate fossil fuels (and Barnaby Joyce).
 
Both the Labor government and the coalition Barnabeyed the Greens proposal to freeze indexing student debt inflation. Now the whole concept of inflation can be a really hard one to get your head around … but HECS debt lays it bare in all its brutality:
 
For many years the indexing has been bugger all (in 2021 it was 0.6%) – yet this year it’s a whopping 7.1%. So your husband’s debt will be indexed up by $6,035.
 
So, have I changed my mind: should you make extra repayments?
 
Well, that’s obviously totally up to you. However, I’d flip the Greens’ advice and pay back any bank debt (that attracts an interest rate) first before you repay any HECS debt.
 
What I think the Greens are picking up on is how the current economic climate is screwing people on low incomes (which includes students). Rents have increased at the fastest pace since 2010, and the cost of most things is skyrocketing.
 
But despite all that, given that HECS is an income-contingent loan (i.e. you only start repaying it once you earn $48,361), I’d be more inclined to put your money in Mojo as a buffer, than make a voluntary extra repayment to the government.