HECS: should I use savings to pay off student debt?

for two years and am wondering what to do about my HECS debt of about $50,000. I also have savings of $50,000. I don’t know whether to pay off the whole $50,000; just half so I still have a “safety net”; or not pay anything. I’m not contributing to super while I’m overseas and not able to save much. I’ve also heard that having a HECS debt is a factor when trying to get a home loan.

“But this would deplete all of your savings,” adds Ryan. “While you’d return home to no HECS debt, you’d also have no fallback position and no deposit for a home purchase.” This would delay your home-buying plans as you’d need to build up a deposit again from scratch while paying rent.This would reduce the debt to $25,000, saving you indexation of 4 per cent on that amount on June 1, 2025 – a $1000 saving, Ryan says.

The impact of the HECS debt on your borrowing capacity depends on your taxable income. For example, if your income is $120,000, your employer will deduct $750 per month from your pay for HECS repayments , and the bank will include this as a commitment. Despite this, you’d be eligible for a $475,000 home loan .Indexation would be applied on the full $50,000. With a forecast 4 per cent indexation for FY2025 and assuming no change for FY2026, you’ll return home to a $54,080 HECS debt, says Ryan.

Source: Education Headlines (educationheadlines.net)

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