With HECS-HELP loans increasing by 3.9% from June 1, you might be wondering whether you should pay off your loan early or not.
So, you’ve probably heard the news that HECS-HELP loans will increase by 3.9% on June 1.
But the big question now is, is it worth paying off your HECS-HELP loan early?
Unfortunately, it ain’t a straight yes or no. Generally, experts advise against voluntarily paying off your HECS-HELP loan because HECS-HELP debts don’t accrue interest (unlike that credit card or personal loan ya took out for your 2019 #Eurotrip).
Because of that, experts generally recommend paying off the bare minimum required once you’ve hit a certain salary threshold (in the 2021-22 financial year, it’s $47,014).
On top of that, if you were to lose your job, you wouldn’t have to make HECS-HELP repayments. The same is not true for your other debts (aka, ya might wanna pay those off sooner rather than later… juuust in case).
Here’s the thing: with an indexation rate of 3.9%, things are… a little different.
Some experts reckon it may be worth paying off some of your HECS-HELP debt if you have the capacity to make voluntary repayments.
It’s all about the opportunity cost.
Paying off your HECS-HELP debt could come at the cost of other investment opportunities, which might earn ya a bit more than inflation (remember: over 10 years, the ASX200 has returned an average of 9.3% each year!).
If you’re unsure of what to do, it’s a good idea to take stock of your financial goals.
If your goal is to have a house deposit by the end of the year, you might want to continue saving for that. But, if your goal is to be completely debt-free, then perhaps paying off your HECS-HELP is right for you.
Disclaimer: All information contained in the Flux app is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice.
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