Your HECS-HELP debt could increase by $900 next week

Uni’s debt is indexed to inflation, which means a steep increase of 3.90% this year. But it’s still the cheapest debt you’ll ever have.

Your united debt will increase by 3.90% on June 1st. This is because inflation is rising rapidly. And loans for higher education (HECS, HELP, VSL, SFSS) are adjusted once a year for inflation.

This is a noticeable increase. In 2021, student debt was indexed at just 0.6% when inflation was low.

The average Australian higher education debt is $23,685. If you apply a one-time adjustment of 3.90%, that increases to $923. That’s a total of $24,608.

I have a big university debt: what should I do?

The indexation rate is quite high this year. But the general financial advice for Australian government education and training loans is true: it’s the least urgent debt you’ll ever have.

You might rush to pay it off, because getting out of debt means more money in your pocket. And paying off some of it before June 1 will mean that the remaining debt will increase by a lesser amount.

But if you have other outstanding debts, you better take care of them first.

Your student debt may lead to a loan application. But high-interest debt like credit cards or personal loans should always come first. If you have a mortgage, you must obviously continue to make your monthly repayments. But you can also repay a little more or put it in an offset account.

It would save you more money than paying off your student debt. Even with this 3.90% adjustment.

Most Aussies would be better off working and letting that mandatory HECS-HELP repayment pay off the debt before they even know it’s gone (if you earn above the repayment threshold).

But the indexation of 3.90% is a good reminder not to forget the debt completely. If you’re not working, it’s good to know how much your debt could increase. Especially if inflation remains high over the next few years.

If you’re working, you could pay off some of it before June 1 and minimize the loan amount before indexation happens.

And it’s also worth looking at your paycheck to see how much is going towards your college debt each month. If you earn $60,000 per year before taxes, you will pay $125 per month to pay off your college debt.

If you make $90,000 a year, that’s $450 a month. What else could you do with this money? You can invest it through an ETF or another form of investment.

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