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.
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.
Each year it compounds. They announce it in March and apply it in June.
So you have balance +7% now Next year you will have balance +7% - any payments taken from your tax return this year + new rate
Hope that makes sense.
I had a debt for over ten years and do remember seeing it index down near the start of it so it is possible, but very improbable.
Thank you!