4 days ago
HECS-HELP loans are set to be reduced by 20 per cent, but do those who paid early regret it?
Faced with years of repaying a student loan under rapidly rising indexation, University of Melbourne graduate Jonas Darmos decided to pay his off fast.
He used his personal savings and a loan from his parents, which he has now repaid, to clear his HECS-HELP debt of around $35,000 just six months after graduating in 2022.
The federal government's new legislation, introduced to parliament on Wednesday, aims to reduce student loans by 20 per cent of their value as of June 1, 2025, and would have saved Mr Darmos thousands of dollars.
Mr Darmos, though, was trying not to dwell on the timing and instead enjoyed the benefits of having cleared his loan early.
"But then again, I don't take too much consideration into that fact because at the time, I was pretty happy to pay that off just for peace of mind.
"I didn't need to worry then about dealing with any more outstanding money, and I feel as well, with interest rates and stuff like that, everything seemed on the rise."
Mr Darmos said his peers also welcomed the flexibility that would come with the student loan repayment income threshold being increased from $54,435 to $67,000.
"If you are earning a little bit but forced to take a portion of that away and then immediately pay off HECS, I think that can be quite limiting."
The director of Albury's Modern You Financial Planners, Daniel Jackson, said around 60 per cent of his clients under 45 had a student debt, which is a unique debt compared to other debts.
He said whether people would benefit from prioritising paying off their newly reduced debts would vary from person to person.
"Ultimately, it is going to come down to every person's circumstance, so with the 20 per cent discount … it is naturally going to reduce the cost of living or extra expense for them."
According to data provided by the Australian Taxation Office (ATO), voluntary student loan repayments in 2023 soared by up to 60 per cent just months before a 7.1 per cent jump in indexation hit those loans in June that year.
Since then, voluntary repayments have dwindled and people are taking longer to make them.
The total value of voluntary repayments made in the 2023–24 financial year decreased by approximately 30.9 per cent from the 2022–23 financial year.
In the same period, the number of individuals who made a voluntary repayment decreased by approximately 11.1 per cent.
The data showed that the average length of time people were taking in 2023–24 to make their first voluntary repayment was 8.2 years — the longest period of time since the data collection started in 2005.
It was also taking people an average of 9.9 years in 2023–24 to repay their debt in full, also the longest time since 2005.
Mr Jackson said the financial breathing space offered by the student loan reduction could allow some people to focus on other priorities, such as paying off credit cards or saving for a home, or voluntarily reducing their student debt.
"If they're in a position where the only debt they've got is their HECS debt, then if they start paying that off a lot sooner, it will be just one less liability down the track," he said.
Mr Jackson said he expected the increased repayment income threshold would also provide a benefit to many students.
"That little bit of a threshold does make a difference, especially with the cost of living that's going on these days," he said.
"That 1, 2 per cent that's getting taken from their wage could be better used to help them have a more comfortable lifestyle or achieve their goals."
