The Risks of HECS-HELP Debt for Your Tertiary Education and Why Lumify Learn is the Better Choice

By Lumify Learn Team  |  June 17, 2024

Imagine it’s your university graduation day. You step onto the stage, the university’s chancellor hands you your undergraduate degree, and you see your friends and family cheering from you from the audience — it’s the most memorable day of your life so far.

But what if that celebratory feeling comes with a hidden cost? That’s the reality for many Australians today facing HECS-HELP debt, the financial weight that comes with a university degree. Originally designed to ease upfront costs, HECS-HELP is now sparking national conversation because of its ballooning effect on graduates’ financial futures. This begs the question: is the traditional university path the only way to achieve your career goals?

In this blog post, we’ll explore what the HECS-HELP system is, its real costs, and why it is currently being considered a financial liability. We’ll also talk about why taking a course with Lumify Learn is the better choice when it comes to your tertiary education.

What is the HECS-HELP loan, and how does it work?

HECS-HELP, which stands for the Higher Education Contribution Scheme - Higher Education Loan Program, is a student loan program that allows students entering university or an approved higher education provider to defer their tuition fees from a Commonwealth Supported Place. Simply put, this scheme allows students to go for tertiary education without paying upfront costs.

Debts incurred under the HECS-HELP system are not traditional debts as they don’t incur interest. Instead, they are indexed every year to reflect changes in the cost of living. The indexation rate is based on the Consumer Price Index, which can vary each year. For instance, starting from 1 June 2-2024, Australians with HECS-HELP debt will face a 4.7% increase due to taxation.

Once a student’s income reaches a certain threshold, compulsory repayments for HECS-HELP debt are automatically deducted from their salary through the Pay as You Go system. These repayments are then applied to the student’s account when they file their tax return at the end of the financial year.

For the 2023-2024 income year, the repayment threshold is set at $51,550 with a repayment rate starting at 1% and increasing incrementally with income.

How Can The HECS-HELP Loan Become a Liability?

The indexation under the HECS-HELP system ensures that the value of the debt keeps pace with inflation and wage growth. This means that when inflation is high, the indexation rate can significantly increase the amount a student owes. For example, if the current indexation rate is at 7%, a student would incur an additional $1,500 to their student loan of $25,000.

However, even if inflation is low, a student's HECS-HELP debt can still grow significantly over time due to annual indexation, which reflects wage growth.

What’s more, the compounding effect of indexation also adds to the burden, as each year’s increase is applied to the entire balance, including previous indexation amounts. As a result, an HECS-HELP debt that might seem manageable at first can become a significant financial liability for graduates. This can impact their ability to save for major life goals and potentially delay their financial security.

According to a recent Finder survey that surveyed more than a thousand people – of which 271 have student debt – more than 3 in 5 respondents are slightly or extremely worried about their ability to repay their HECS debt. The study even found that 12% don’t believe they’ll ever be able to repay their loan.

The Weight of HECS-HELP: A Typical Scenario

Shanice is a recent graduate with a degree in Information Technology. Just a few months after leaving school, she gets a job as an ICT Systems Administrator with a salary of $85,000. Because this falls within the HECS-HELP repayment threshold, she needs to start paying 5% annually, equal to $4,250 every year. While Shanice enjoys her job supporting and troubleshooting computer servers and networks, the effect of the HECS-HELP on her financial situation starts to cause her anxiety.

To make things worse, the amount she needs to pay might increase further next year if the indexation rate goes up. This means her repayments could adjust automatically, potentially becoming a bigger burden on her financial obligations. This challenge of ongoing payments could make it difficult for her to save for a home or a car or start a family in the future. Overwhelmed with worry, Shanice wonders if there might have been a better path to achieve her career goals.

How Lumify Learn Can Help You Achieve Your IT Career Goals

If you want to start a career in IT, there are other paths that you can take aside from the typical university route. One of these is registered training organisations like Lumify Learn.

Lumify Learn delivers nationally accredited and industry-aligned courses, plus a wide range of vendor-endorsed boot camps, that prepare you for a rewarding and lucrative tech career.

The demand for IT professionals in Australia is currently high. In fact, according to ACS Australia’s Digital Pulse 2023, the country will need 445,000 more technology skilled workers by 2030 to stay in pace with international economies. This translates to 60,000 technology workers each year.

Lumify Learn can give you a head start in building your IT career. We offer courses in the following areas:

All our courses are conducted 100% online, so you can balance your studies with your personal and professional commitments. You will also receive useful resources, practical exercises, and personal feedback from our expert trainers and mentors. And through our Lumify Edge program, we will help you get noticed by employers through our exclusive job portal and professional resume and LinkedIn profile update service.

Unlike taking the traditional university path where you can drown in HECS-HELP debt, Lumify Learn offers interest-free payment plans ranging from 8 to 24 months, starting from as little as $53 per week. By taking a course with us, you can avoid the HECS-HELP debt trap and be job-ready in the IT industry in less than half the time and at a fraction of the cost.

Starting your career in IT need not be stressful or expensive. Enquire with us on a course today.

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