Should I tackle my HECS debt or save my money?
My accumulating HECS debt is something I’ve been becoming increasingly aware of, despite how easy it is to forget. As another semester comes and goes, and I reenroll for semester two, the fees are stacking up.
Why haven’t I been paying it?
One question I have been asking myself is, why haven’t I been paying it off? I have had the money to tackle these fees as they come but have decided to save preferring the nice full look of my bank account. I have always wanted the freedom that comes with having a little bit of extra cash saved in case of a rainy day. I would say things like, ‘’well what if I spontaneously decide to take a gap year and travel the world’’ or, ‘’what if I decide to buy a food truck or a caravan and live out of it’’, like I’ve always dreamt. So, is it better to have this security and ‘freedom’ or walk out of university debt free?
Some things to think about
Unfortunately, I haven’t found any magical answer. There is no ‘do or do not’ to life and finances. Comparably, your HECS debt is indexed (meaning it is increased each year to reflect the cost of living, source), but doesn’t have interest rates common with other loans such as cars and house deposits which means you should probably preference paying these loans off first before you tackle your HECS to avoid paying less interest (source). However, at this stage in life not a lot of university students are facing this kind of debts yet. In terms of increased youth allowance payments, my understanding is that they are for various reasons including to stimulate the economy during the coronavirus pandemic and minimize the damage to the economy, however the supplement will eventually end and the country will be paying for it in the future (source). In this sense, the payments in my mind are to use rather than pay back the government HECS debt I have incurred. However, whether the payments would serve better for me to save or to spend on my HECS debt and walk out debt free in a couple of years is dependent on an individual’s financial position and their decisions. My dad had some good advice about managing your HECS debt that year by year your debt doesn’t seem too great and is just a few thousand dollars added to your HECS, but if you ignore it and put it at the back of your mind before you know it you’ve finished your degree and have over $20,000 in debt. A sum that can seem unmanageable. So, I may pay some of my HECS off but not all of it and choose to save, I’m really not sure. However, one thing I am sure of is that it is always good to be aware of your HECS debt and this awareness is something I am going to try to keep in mind going into the future.