Nearly 3 Million Aussies Are Ready for Major Student Loan Payment Increase Before the June 1 Deadline

Nearly three million Aussies saddled with student debts are facing a huge deadline and have only six days before they are plagued with a major payment hike.

Nearly 3 Million Aussies Are Ready for Major Student Loan Payment Increase Before the June 1 Deadline

From June 1, the indexation rate applied to HECS-HELP loans will increase to 3.9 percent, the highest rate in a decade.

Last year it was only 0.6 percent.

The average HELP debt is $23,685 based on data from the Australian tax office 2020-21, suggesting that the average debt will increase by about $923 on June 1.

Financial advisor at Sydney’s Golden Eggs, Max Phelps, advised people with student debt to come in before the deadline and pay it off or pay it off if they could.

Camera IconAussies with student debt are set for a pay increase. NCA NewsWire/David Geraghty Credit: News Corp Australia

But he added that young people should see blame in the context of their other goals.

“If paying off a student loan suddenly means you don’t have a down payment on a house, and you have to buy a house, then, of course, it’s a bad idea to do it,” Mr. Phelps said.

And if you have a personal loan with an interest rate of 10 percent or a credit card debt of 20 percent you don’t have to pay it off.

“There’s no point taking money from a 20 percent credit card to avoid a 3.9 percent growth in HECS.

“We don’t want people to take on other debts so that they can pay their HECS.”

However, for those with the cash to spare or who can withdraw money from a mortgage account with an interest rate significantly lower than 3.9 percent, “this is the week to pay it off”.

Mr. Phelps said those who paid off their student loans were often rated more favorably by mortgage loan providers.

“Often once they pay off their HECS, their usability jumps up, meaning they can buy the property they wanted tnd not have to wait another six months to save for it or a raise,” he said.

“It can increase borrowing capacity by having HECS debt for longer.

“But do it this week or just carry on until next year around this time.”

Camera icon The average HELP debt is $23,685 based on data from the Australian Tax Agency 2020-21. Credit: istock

There were 2.9 million people with outstanding HELP debt in 2020-21, with outstanding HELP debt rising to just over $68.7 billion, up from $66.4 billion in 2019-20, according to the ATO.

Mr. Phelps predicted that with global inflation rising, the HECS indexation rate might increase even more next year.

Although student loans do not yield interest, the debt is indexed annually according to the consumer price index, which measures inflation.

Inflation is currently at 5.1 percent per year, and wages are not keeping pace.

Wages rose 0.7 percent lower than expected from January to March and 2.4 percent in the past year, data from the Australian Bureau of Statistics showed this month.

Students can start paying back their HELP debt through their taxes once they earn more than $47,014.

In addition to the mandatory repayments, they can voluntarily repay at any time.

Lori J. Kile
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