Paying for uni? HECS vs Upfront payment (4 Viewers)

[withoutaface]

No, they take it out of your tax. i.e If you are earning in the minimum income bracket to pay back HECS $43-48k you pay back 4%.
I'm paying almost $4k in HECS this year (although I'll probably get a refund becuase its more than I owe)
It may not seem like much out of your annual income, but when its coming out weekly and you have a morgage and bills to pay, it can be annoying.

Its not hard to pay your HECS as you go. My degree was a band 2, and I was only paying around $2 a semester after I got the discount.

You'd be paying more extra interest on that mortgage than you'd pay in hecs contributions if you chose to pay the money towards hecs instead of saving it and needing to borrow less to buy a home.

 

[annabackwards]

it boggles me that anyone (other than those where their parents are paying) have enough money to just pay it all up front!

Anyone have an extra $30,000 they wanna throw my way . . .

In saying that I pay rent etc so I guess if you pay no expenses and work you may be able to do it.

Paying per semester is quite doable. My parents would've offered to pay for mine but i would've paid 'em back anyway because of guilt and what not, but i was lucky enough to get a scholarship so i'll just be paying it myself now ^^

 

[Bananaberry]

You'd be paying more extra interest on that mortgage than you'd pay in hecs contributions if you chose to pay the money towards hecs instead of saving it and needing to borrow less to buy a home.

Well I was just speaking from my current situation. I already have a morgage and me and my fiance are paying it off. It's ok with our dual income and he does earn a lot more than i do, but paying an extra $70 a week in tax is just annoying when it can go towards other stuff.

 

[withoutaface]

Putting $3500 down a semester would have been equally annoying, but you'd be paying less now if you'd put that away somewhere to go towards the mortgage than if you paid your hecs upfront.

 

[Bananaberry]

I was only paying $2k a semester, and half of it was paid by my parents anyway, and they would prefer to pay for my education than put it towards a house for me and my partner, especially with the income he has.
It was fine for me to put money towards paying off my HECS, I had nothing else to pay for at the time and I had no knowledge or plans in buying a house so near in the future.
I only owe around $3k in HECS at the moment which should be paid off by the end of the year.

Im just saying not everyone is in my situation, so it can be different for everyone, but IMO, try and pay your HECS off as you go though uni, even though it might seem like a good idea to pay later, it just puts a dent in your income when you have more things to pay for.

 

[rx34]

My parents are paying for me on the condition that I get acceptable results. No fails and at least a few distinctions.

 

[Ethanescence]

Put that in a term deposit and pay it all off at the end of your course.

Why?

 

[Will Shakespear]

Why?

~compound interest~

 

[Ethanescence]

~compound interest~

So if I put it in a term deposit over the duration of my course, will the gains in compound interest really exceed the 20% saving one could make by paying it up-front?

I just want a general idea of why this would be a better alternative.

 

[Bananaberry]

I saved almost 4k in HECS fees by paying up front, unlikly you will gain 4k in interest.

 

[ajdlinux]

I saved almost 4k in HECS fees by paying up front, unlikly you will gain 4k in interest.

You could quite easily make over $6K in interest if you put $20K in a term deposit over 4 years.

 

[Bananaberry]

You could quite easily make over $6K in interest if you put $20K in a term deposit over 4 years.

I dont think many people who are just starting uni have a spare 20K lying around.

 

[ajdlinux]

I dont think many people who are just starting uni have a spare 20K lying around.

Indeed, if you can't pay the whole lot up front it might be a better option to at least pay part of the HECS up front, although if you did have the money to pay it all upfront, putting it in a 7.00%pa term deposit, compounding annually, would give you $1130 extra than paying off a 3-year humanities degree upfront. So it's different for everyone I guess.

 

[Bananaberry]

What about when the student pays the interest (CPI) for the HECS loan if they are deferring it. I think at the moment it is around 3.9%.

 

[ajdlinux]

What about when the student pays the interest (CPI) for the HECS loan if they are deferring it. I think at the moment it is around 3.9%.

That is a very good point which I neglected. Taking that into account, the term deposit option is only about half as profitable, assuming average indexation of 4%pa.

 

[Bananaberry]

By the way, just something that Im not sure about. If you have been in a job for say half the financial year, earning an income that is above the threshold, but you have not earnt that income in the full year becuase you have not worked in that job the full year, so your taxable income is below the threshold, do you still have to pay a compulsory HECS repayment.
I think as of the end of the financial year I will just fall short of the $43k threshold becuase I have not been in my current job the full financial year, but I have still been making repayments every week.

I hope I explained that without too much confusion

 

[withoutaface]

So if I put it in a term deposit over the duration of my course, will the gains in compound interest really exceed the 20% saving one could make by paying it up-front?

I just want a general idea of why this would be a better alternative.

You'd only need to make 10% back for it to be viable to pay it all the second you leave the gates, and assuming a 3 year course anything above 3% makes it viable for the first year at the very least.

 

[ajdlinux]

By the way, just something that Im not sure about. If you have been in a job for say half the financial year, earning an income that is above the threshold, but you have not earnt that income in the full year becuase you have not worked in that job the full year, so your taxable income is below the threshold, do you still have to pay a compulsory HECS repayment.
I think as of the end of the financial year I will just fall short of the $43k threshold becuase I have not been in my current job the full financial year, but I have still been making repayments every week.

I hope I explained that without too much confusion

As far as I know it's based on your taxable income as reported in your return, so if you earn under the threshold for the whole year there's no compulsory repayment.

 

[Epic]

Seeing as it's all done through tax, does that mean that you wouldn't have to pay any of it back if you decided to work overseas your whole life? (Not trying to get out of paying it, just curious lol).

 

[ajdlinux]

Seeing as it's all done through tax, does that mean that you wouldn't have to pay any of it back if you decided to work overseas your whole life? (Not trying to get out of paying it, just curious lol).

That's basically correct.

[yay, I have 1000 posts now ]