Voluntary Payments of HECKS. Does anyone do it? (1 Viewer)

[GreenLeaf]

And is it worth it in the long-term?

 

[Captain Gh3y]

yep

20% less + no debt

 

[Foxodi]

Well out of the options paying your debt off clearly makes the most financial sense.
Though personally I'd use the money to create a supplement income/self-employment.

 

[blue_chameleon]

Over the long-term? It doesn't make any real difference whichever way you go.

If you have additional funds you're not doing anything with then yeah, go for it.

 

[GreenLeaf]

By the long-term I'm referring to my long-term savings. If I end up moving out of home, I'd much rather have the money as a safety net. The dilemma here, is whether the $400 govt incentive is worth giving up the hard-earned savings of a poor uni student. On the other hand, I'm not one to pass up on free money.

 

[withoutaface]

Put it in a savings account

 

[xeuyrawp]

yep

20% less + no debt

Yeah, but you really have to be able to see no difference between x cost now and x+20% later... For some people, there's a big difference, and the 20% is worth it.

To be honest, I wouldn't be paying HECS off unless it was something like an 80% discount.

 

[RIZAL]

And is it worth it in the long-term?

The option that makes the most financial sense in raw dollar terms is not always the best one. In a great deal of cases it can actually represent the worst decision for an individual. Money is a means to an end - CONSUMPTION. And thus we need to analyse the effect of deffering HECS on consumption.

The decision to delay depends on your individual utility of consumption preferences. I.e. how you derive enjoyment from consumption depending on the state of the world and the time period.

If you choose to pay HECS in the future, you will enjoy the following benefits:

- Consumption at a younger age (normal people derive more enjoyment out of spending $15k at age 20 as opposed to $15k at age 30)
- Extra liquidity
- Money in case of an emergency

The decision is also affected by your expected future earnings. If you expect your HECS repayments to be a negligible % of your future income, definitely defer it.

Given your admission that you are a poor uni student, I would say definitely 100% defer.

 

[DefenceMinister]

Rizal, nice summary. You sound like an economist.

Also don't forget inflation. If your degree takes lets say 5 years and costs $50K and you choose to work overseas for 5 years after graduating. Assuming the RBA keeps the inflation rate at 3%.

Thats, saving of (50,000 * 1.03^10) - 50,000 = $17,196 = 34%

Or without the 5 years overseas work,

saving of (50,000 * 1.03^5) - 50,000 = $7,964 = 16%

This is assuming that prices of subjects are not corrected for inflation year to year, in my case they weren't.

Any eco students out there to back this up?

 

[Azamakumar]

Are you serious? You realise the amount you actually repay DOES NOT change in real terms...

 

[DefenceMinister]

Azamakumar, of course the amount you need to pay back does not change. I used it as an example since I don't know what you will be earning after you graduate.

I guess a better example would have been comparing what you earn now, or could earn now as opposed what you would earn in 5 or 10 years time taking inflation into consideration.

 

[jake2.0]

saving of (50,000 * 1.03^5) - 50,000 = $7,964 = 16%

But you don't pay for all the uni subjects you're ever going to do at the start of first year. You only pay for what you are going to do in the following semester.

 

[DefenceMinister]

Yeh that is true, but checking my invoices from uws, subject prices remained the same over 3 years.

I did ask some unsw friends, and they claim unsw corrects for inflation every year.

In any case, after graduating I think it would be in your best interest to defer payment as long as possible.

 

[ifsonotso_100]

learn to spell hecks properly

 

[withoutaface]

Rizal, nice summary. You sound like an economist.

Also don't forget inflation. If your degree takes lets say 5 years and costs $50K and you choose to work overseas for 5 years after graduating. Assuming the RBA keeps the inflation rate at 3%.

Thats, saving of (50,000 * 1.03^10) - 50,000 = $17,196 = 34%

Or without the 5 years overseas work,

saving of (50,000 * 1.03^5) - 50,000 = $7,964 = 16%

This is assuming that prices of subjects are not corrected for inflation year to year, in my case they weren't.

Any eco students out there to back this up?

versus 1.08^5 = 46% increase over 5 years if you put it in a savings account.

 

[Chrisssss]

BankWest regular saver: 8%pa

 

[jb_nc]

Defer payment as long as possible and invest the money in something (if you're being "smart") which earns more than the rate of inflation (anything other than government bonds should have a yield greater than that) or spend it if you want to have fun.

Anything is better than paying of HECS.

 

[HSC guy]

What happens if you decide to pay HECS after uni and then you move overseas before you've paid it off?

 

[wrong_turn]

and if you stay overseas, then you dont have to pay it back until you come back to live in residence.

 

[lala2]

Depends on your living circumstances. If you are living out of home or even living at home but paying rent, food, bills etc, use the $4000 for your own expenses and chuck the rest in a savings account. If you are lucky to live at home rent free and don't incur much other expense, I would split half the money, so $2000 is for paying off debt (you don't have to pay for all the semester's subjects do you?) and the other $2000 I would chuck in a savings account.

As you can see, I really advocate the use of a savings account And if you can somehow gather a few extra grand to make the $5000 mark, chuck it in a term deposit.