“I’m in serious debt and I’m only 24!”

As a Master’s graduate I can tell you that I am technically already in thousands of dollars of debt at 24 years of age even though I don’t own a credit card and haven’t taken out any personal loans for various youthful splurges. My HELP repayments have been taken from my income on a regular basis for at least a year and these deductions combined with the standard tax seem to be impacting my take home income significantly.

As part of the new proposed budget the Federal Government has now announced a series of changes to the HELP fees charged to all university students in Australia which means students will have to pay even more for their courses and start the repayments earlier than ever before. As a result, 183,000 are expected to make their repayments following this change.

The government will be attempting to dramatically reduce the level of bad debt in its $150 billion portfolio of student loans. They will be doing so by lowering the income threshold for repayments down to $42,000 a year from 2018-19. It is currently set at $56,000 so this change will mean future graduates on a minimum wage will need to start the repayments almost immediately.

I am already in thousands of dollars of debt even without a credit card!

The percentage at which the student loans will be taxed will be derived from the amount earned each year which means it will start at 1% from $42,000 to $44, 250 and then increase to 1.5% from $44, 520 to $47,191. Although these percentages might seem trivial, the tax rates do make an impact on those entry-level graduates on a starting salary. If this measure is passed by the Senate the new repayment schedule will also apply to all people with current loans, not just the new loans that are taken by students from the year 2018.

At this stage I myself am not even clear where my HELP debt stands. I recently visited the ATO website to view my amount owed and was rather perplexed when it seemed to have gone up rather than down. I have been working full time and have been making the repayments according to my amount taxed but none have been reflected on the website. After calling up to enquire I was told that the website was only updated once a year around tax time and that these deductions should be visible then. No deductions have been reflected in a year but the indexation rate has certainly been applied which means my debt is in fact growing. 

It has me asking myself, do I benefit from making voluntary payments on top or is that too much to ask considering my finances? Shouldn’t I focus on saving for a deposit instead or investing? Where is my money best put forward? 

Where is my money best put forward?

All things considered, it at times appears that young students are better off financially starting full time work right out of high school instead of pursuing further education. A vast majority of those who choose to study need to take out the HELP loan in order to be able to do so which means they are already at a disadvantage in their financial status, especially considering they tend to start off on very small incomes due to their lack of practical experience. Starting on a minimum wage to get a foot in the door means they have limited funds for living expenses and will now also face increased course fees and greater tax rates and repayments.

I certainly look at these proposed changes as a challenge and possible deterrent from further postgraduate study. If my qualifications cost me a great deal but I can’t gain a fair return due to limited practical experience then am I not stuck in a paradox? 

Tax Tips and Tricks for Recent University Graduates