What I wish I had known sooner about my student aid debt

When I started college, I had an expensive lesson on student debt.

I was a bit arrogant and didn’t always work as hard as I should. Soon I was on track to fail some of my classes – so I decided to pull the pin.

What I didn’t understand was how much it would cost me. As I withdrew after the date of the census, I had to pay for the courses which I never took.

This is just one of the many mistakes you can make when you don’t understand how the student loan system works.

If you’re new to college or TAFE, or wondering about your student debt, here are some important things to keep in mind.

What is HELP debt and how does it work?

The Higher Education Loans Program (HELP) is a loan provided by the Australian government to help you cover the cost of your university fees. You may know the program by its old name, HECS.

Compared to overseas student loan programs, the HELP program is one of the best available, says financial educator and author Lacey Filipich.

“There’s a lot of media coverage in the United States about people going into huge debt after going to school and then having a really hard time paying it back,” says Ms Filipich.

“If students are considering studying and HELP is the only way for them to do so, this is a great option to consider.”

How is HELP debt repaid?

When you start college, paying off your student loan can seem like a distant problem. But you have to repay it — and repayments are automatically deducted from your earnings.

“There’s a certain income you have to earn per year and once that happens, you have to start paying off that debt. It’s about $47,000 a year right now,” says Ms. Filipich.

“Once you hit that threshold, you start paying it back at a certain percentage.

“And that goes up to a maximum of 10% of your earnings [for people earning $137,898 and above]which will simply continue to reimburse it automatically through your payroll.”

Above all, your debt will also increase every year.

“What’s great about HELP, of course, is that it’s CPI (consumer price index) adjusted,” says Filipich.

In other words, the loan will only increase with inflation. This is a lot compared to other loans that charge interest.

“This is where we are different from the United States,” says Ms. Filipich.

Why changing courses can be expensive

The freedom to switch lanes once you’ve started studying is wonderful, but it can also significantly increase your final bill.

Jackson, 25, moved to Melbourne to study aerospace engineering when she was 17. After a year, he realized he didn’t really like it.

“After I moved back to WA, I ended up spending two years studying other courses that I wasn’t really interested in, just because I felt like I had to be in college,” says Jackson, who has asked not to disclose his last name for reasons of confidentiality.

With around $60,000 in HELP debt to pay, Jackson says he wished someone had told him to take some time to decide what to do rather than just “pick something and finish it.”

Keep in mind that you can change your mind without paying a fee by withdrawing from classes before the census date.

“I think getting value for money is important,” says Lacey.

“If you’re going to spend that money to get that education, you don’t want to waste it lightly.”

Why you can’t borrow

Your HELP loan does not cover accommodation, laptops, textbooks and other similar costs.

Discounts on your fees are available if you make upfront payments. It can be a good way to save money on the trail, says Filipich.

“Maybe you get some work while on vacation and you’re able to save some extra money and you could put it into your HELP debt while you study and you’ll get that reduction,” she says. .

Ms. Filipich says it’s also a good idea to take the time to decide that a particular field of study is right for you.

“There are great people to talk to at universities who can help you with these discussions and talking to your friends and family about their experiences and how they approached it can help you before you go. sign up,” she explains.