HECS

Hi Bwendan,
In 1986 when I was at RMIT, Bob Hawke introduced a new HECS scheme as a ‘one off’ payment of just $250 a year. Almost 20 years later, the costs are incredible. If you are to study medicine or law the costs are even higher. We are now going down the American path where parents who have a child start saving for ‘College’. The ironic thing is that if you pay the full amount for one’s chosen course ‘upfront’ then you are entitled to a discount (used to be 15%?). So students with rich parents were able to pay for there son/daughter, where as the poor couldn’t afford to pay thousands of dollars up front and were therefore denied the discount. I put myself through Uni twice struggling to pay for just being at Uni/shared renting etc. I put myself through Uni by working in factories during all the student holidays. If you can pay it off in advance or in installments then that’s what I would opt for. You can’t beat the system. I don’t know what the current income threshold is once your working before you start paying it back, but I know the threshold to start paying got lower and lower. Ironically I was at the news agent today flipping through a wealth creation mag (go to a newsagent and look through the investing magazines section, I can’t remember the name of the magazine). The magazine had a special article on HECS. If I find the magazine tomorrow I’ll pm/post the magazine’s name.
Kind regards,
Gatsby.
(PS. In terms of ‘avoiding to pay it off’ don’t bother. When I returned once from being overseas for 2 years. Customs stamped my passport. Four weeks later I got a letter from the Dept of Education, Employment and Traing with a ‘huge’ HECS bill!)

Hey Brendan,

HECS stands for Higher Education Constribution Scheme and as stated is the fees you pay to attend university. Rates are different depending on which course you do (at least it was when I finished about 7 years ago). Also note that if you fail a unit (which I did once), you still have to pay the HECS for the failed unit! As Tools mentioned, you can elect to pay up front and get a pretty good discount, otherwise you pay once your income reaches a certain level.
When you are employed, you have to tick a box stating that you have a HECS debt. From there you pay off your debt through your salary, and if for some reason you don’t pay enough during the year based on your taxable income, it gets taken out of your tax return.
My debt was 12 grand for an Engineering degree and can happily say I have now got rid of it!

The Feb 2005 edition of Personal Investor magazine has a good article covering HECS issues on pp.36-38.

Unfortunately, it says that there are only 3 ways to avoid HECS debt:

1. Leave the country straight after your degree, cease to be a resident for tax purposes, then return to enjoy retirement in Australia when no longer earning an income.

2. Make a paltry income for life. If you never earn above the threshold amount – $35,000 in 2004-05 and $36,184 in 2005-06 – you will not have to repay your debt. The income amount will be indexed every year.

3. Die. your debt will not be transferred to anyone.

The discount for upfront payment at start of degree has dropped from 25% to 20%. Discounts on voluntary repayment afterwards has fallen from 25% to 10%.

[scholar]

I do. This is a burden imposed on the younger generations by the legislation of a generation of baby boomer (or slightly older) politicians with the support of a generation of baby boomers all of whom had access to a free+ education. Bear in mind those same younger generations will also have to foot massively increased tax burdens (yes, as in they will be paying more tax!) as the BB generation age otherwise starvation amongst pensioners will become commonplace…

Yes, you should, but by and large you don’t and won’t! The education system has been diluted in the quest to become a ‘clever country’ to such an extent that any half-wit can attend university – much to the detriment of the actual potential intellectuals. This results in an increase in the number of people seeking employment who have degrees, and a lower value in the degree itself.

For a specific example, three of my parent’s children have attended university. They are now all working – one earns over $90k pa, one $60k pa and the other $38k pa. Guess which ones dropped out in 2nd year? They have both paid off their debts, while the other still has over $20k to go. Still, he has a piece of paper!

I don’t mean to suggest that nobody should go to university. By all means if you are studying and learning something useful (science/ economics/ business/ engineering/ programming/ law/ medicine etc), you should do well. If you are going just because your teachers said to and doing some mickey mouse course – reconsider.
Cheers, F.[cowboy2]

I guess that’s a cynical way of looking at it. Free is nice, free is semi-ideal, but free is not sustainable. What I believe is important is that everyone has an equal ability to the opportunity of going to university, and a fair method of recouping the costs at a later time.

At 35k, your brother wouldn’t be paying any HECS at all. And I believe the current %’s are fair for amounts that you earn. I have questions about your whole sentiment about not earning more. To quote a recent article:

http://www.cis.org.au/exechigh/Eh2003/EH13303.htm
(Emphasis added)

> How is this related to property?

When I applied for a new loan last week, I had to provide my latest HECS statement. It’s a debt like any other. There is no interest, but the debt does increase with inflation.

My online investing diary: http://retireyoungandwealthy.blogspot.com/