Hi there, this is one for the Aussies.
I would like some opinion about whether I should make some voluntary repayments on my HECS debt or not, given the Australian federal budget 2014- which changes interest on HECS-HELP debt from being in line with the CPI to being in line with government long-term borrowings.
Here's some background:
- Five years at university with the highest HECS bracket for practically every subject;
- A couple of years out, the professional salary I received was 'relatively' low ($40k), which is not uncommon in the industry (and fair, I believe, as during the first few years the employer has to invest a lot of time and patience in further on-the-job training);
- I then ended up in a training program which offered a tax-free stipend for three years. This was actually quite generous ($50k p.a. in the hand, plus a little extra taxed funding, plus ability to apply for a little extra travel funds) given that I got a post graduate degree and significant one-on-one professional training. And I managed to go overseas for several conferences and holiday at the same time, *plus* put money into a First Home Savers Account (which looks like it may also be scrapped in this budget). During this period, no HECS repayments were made.
- I have never made any voluntary repayments, considering interest on HECS has been in line with CPI, and I have been able to 'beat' that interest by high-earning savings accounts.
- I now have employment that will see me reliably earn somewhere between $70k - $90k p.a for a four-day week. The reason for the range is that penalty rates for after hours work exists which is 'lumpy', and there is often consultancy work on the side, which is not very reliable, but when I do get it, it pays very generously.
- Over the past five years, my expenses have averaged out to be about $25 - $30k, living what I would consider very comfortably. This average has included multiple interstate moves, several overseas holidays, donations to charity, etc. It also involves professional indemnity insurance and income protection (the former is necessary for consultancy work, the latter I feel is wise given the risk of serious injury in my line of work). I acknowledge I could go lower with my expenses but I like to be able to donate to things.
- Don't intend to purchase a house in the next few years. I like where I live- it's close to public transport, in a good suburb, the rent is well below market average for the location and well below what I would be paying on a mortgage. The landlord has no intention of raising it or selling the property any time soon.
- Other than my HECS-HELP debt, I have no other debt. Never owned a credit card, etc.
So... I have about $32k of HECS-HELP debt.** At what could end up being a 6% interest rate, should I start flinging some of my money into voluntary repayments? Barring any significant changes in my circumstances, I should be able to wipe out my debt easily within 2 years if I put my mind to it.
Any advice, comments, and reasoned ridicule would be appreciated.
** Sounds high, and it is, but not as high as one of my siblings, that has HECS-HELP + PELS = approx $40k.