Money Saving and Paying Off HECS Debt

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A Personal Journey: There are two things I hate paying for in life are parking and interest!
As a single parent juggling a demanding career alongside endless medical appointments for my spirited child, managing finances became a delicate balancing act. My journey from uncertainty about my financial future to paying off my Higher Education Contribution Scheme (HECS) debt through the Australian Taxation Office (ATO) reflects not only personal resilience but also the importance of understanding available financial options.


Image Credit: Tarnia Riggs Creation March 2024

Starting the Journey:
Working at prestigious firms like Woods Bagot and GHD, I found support in flexible working hours, allowing me to balance my career with my son's needs. Inspired by the sea of talented professionals surrounding me in these organisations, I made the decision to pursue higher education, starting with one subject at a time. Initially paying upfront for my studies to receive the 10% discount, I later transitioned to utilising the HECS system offered by the ATO, providing greater financial flexibility.

HECS Debt: A Decade-Long Journey:
Beginning in 2014, my journey to pay off my HECS debt spanned ten years, including a postgraduate degree. Initially, I was paying upfront to receive the 10% discount, (which now with the recent announcement from the government his week has been cancelled.) Over my study period, I experienced firsthand the impact of interest accumulation and the significance of timely repayments.

Here's a breakdown of the interest rates applied by the ATO each year:
June 2014: 0.00%
June 2015: 0.00%
June 2016: 1.50%
June 2017: 1.50%
June 2018: 1.90%
June 2019: 1.80%
June 2020: 1.80%
June 2021: 0.60%
June 2022: 3.90%
June 2023: 7.10%
June 2024: ????

The Impact of Interest Accumulation:
Over the years, accumulated interest significantly affected the total amount owed, despite regular repayments. Challenges arose, such as the CPI being applied from June 1st, causing discrepancies between expected and actual repayments. Notably, a lack of awareness led to unexpected charges when planning repayments. I had put money away savings in the tax year 2022-2023 to pay off a large sum on 30 June 2023, unaware that the CPI is applied from June 1st, not July 1st, therefore charged nearly $500 for not being aware of this nuance.

Impacts of Set and Forget HECS | ATO Repayment System:
Many are unaware that while the ATO deducts HECS payments weekly, the CPI is applied from June 1st. Payments are applied upon tax return lodgement after 1 July, with CPI adjustments made before the final payment, contributing to financial intricacies. Therefore, deductions from pay contribute to paying the full CPI to the balance every year, if you're not paying the interest goes on the new balance. In my past life professions as a Security Analyst for the Big 4 and a Credit Assessor for Devine Homes, I can tell you this debt is impacting borrowing capacity from lending institutions.

Achieving Financial Freedom:
In March 2024, after a decade-long journey, I finally paid off my HECS debt, experiencing immense relief and accomplishment, marking the end of a significant financial commitment.

Conclusion:
My journey underscores the significance of financial literacy and strategic planning. Understanding available options and repayment intricacies can alleviate financial stress and accelerate debt repayment. As I reflect, I aspire to inspire others facing similar challenges to navigate their financial paths with resilience and determination.

Total Interest Paid: $3,127.21

Disclaimer: The personal experience shared here is intended for informational purposes only and should not be construed as professional financial advice. While every effort has been made to ensure the accuracy and reliability of the information provided, individual financial circumstances may vary. It is recommended that readers seek advice from the Australian Taxation Office (ATO) website or consult with a registered accountant or financial adviser for the latest information and personalised financial guidance tailored to their specific needs and circumstances.

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