Is it a good time to pay off your HECS debt?


I’m 25 and make $117,000 a year. My only liability is my HECS student debt of $29,400, on which the interest rate just went up to 3.9%. I’m not looking to buy a property for a few years, and thanks to the generosity of ‘mom and dad’s bank’, I don’t have to save for an initial down payment. Would it be wise to pay off HECS debt now, as I fear it will continue to grow and affect my ability to borrow when I eventually apply for a mortgage? The other option would be to invest in the sharemarket.

You’re in a relatively good position for someone your age, and I think getting out of debt as soon as possible would take the uncertainty out of your future and put you on a solid financial footing.

Credit:Simon Letch

The HECS interest rate is indexed to inflation and can therefore reach 5% in the short and medium term.

If you decide to invest in stocks by paying off HECS debt, you could suffer a loss if the stock market goes down further or face capital gains tax if it goes up.

Earning an effective tax-free return of 3.9% by paying off HECS debt may be your best bet.

I am 61 years old and my wife is 55 years old. We have about $700,000 superannuation between us and are looking to sell the family home and downsize it to another property on the Sunshine Coast where we will both have jobs. The move would allow us to add about $200,000 to my wife’s super, which means we would have a new house worth $1.5 million and about $80,000 in cash. If I retire at, say, 65 – and my wife continues to work – do I consider myself an individual for a pension (since she is not retired) or are we a couple ? We need about $80,000 a year to live on. Do we make up the shortfall between what we need and what my wife earns by making regular withdrawals from the super?

For the purposes of the Centrelink old age pension, you would be considered a couple, with all your assets included, regardless of who owns them.

The exception is the retirement pension, which is not taken into account until your wife has reached retirement age. So it would be prudent to speak with a financial advisor as you approach retirement and determine how much money should be held in your wife’s super and how much in yours.

You would be subject to both an asset test and an income test, but since a large portion of your financial assets would be held in your wife’s super, you would most likely fall under the rules of the income test. revenue. Therefore, his income may be the deciding factor.


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