I’ve paid off most of my HECS debt, should I just repay the rest now?
Whether to repay your HECS-HELP debt early depends on a few key factors. Unlike most other debts, HECS doesn’t attract interest. Instead, it’s indexed each year based on the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). That said, because repayments are automat- ically made through your tax return once your income reaches the annual threshold ($54,435 for 2024–25), there’s no interest penalty for not paying it off sooner. If you’re not likely to earn significantly more in the near future or have other debts with higher interest rates, prioritising those in- stead may make more financial sense. However, if you have surplus savings and specific goals or obligations, voluntarily reducing or clearing your HECS could be worthwhile. Your financial adviser can help you weigh up whether repaying your HECS now aligns with your broader financial strategy
FAQs
Should I pay off my HECS debt early?
Paying off your HECS debt early can be beneficial if you want to reduce indexation costs. However, since HECS is interest-free and indexed to inflation, it’s often better to prioritise higher-interest debts first.
How is HECS-HELP debt indexed each year?
HECS-HELP debts are indexed annually based on inflation (CPI). The indexation ensures your debt keeps pace with the cost of living but doesn’t accrue traditional interest.
Will paying my HECS debt early affect my credit score?
No, HECS-HELP debts do not appear on your credit report, so paying them early won’t impact your credit score. However, reducing the debt may improve your borrowing capacity.
Can I make voluntary repayments on my HECS debt?
Yes, you can make voluntary repayments at any time through the ATO. These payments can help reduce your total debt and future indexation.
Is it smarter to invest money instead of repaying HECS early?
It depends on your financial goals. Since HECS indexation is generally lower than investment returns, many people choose to invest instead of repaying early—especially when other debts have higher interest rates.
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