Friday, 28 March 2008

Why I Don't Pay Off HECS Upfront

I have been reading Am I Better Off Paying HECS Upfront? and I will give the reasons why I don't pay any HECS upfront.

What is HECS? Only those in Australia would know. HECS is a student loan provided by the Australian Government. The Government subsidizes certain university degrees and gives students an interest-free loan that needs to be paid off only when the student graduates and gets a job. I know someone who, after graduating from university with a science degree, decided to live in a Catholic monastery, and so she wouldn't need to pay off any HECS.

Students can elect to pay off part of their debt while they study instead of having the debt paid off when they work. If they do this they get a discount.

Because HECS works in the background and only affects my earnings if I get a full-time job, then I choose to ignore it and treat it as if it were an additional tax.

I do not pay off HECS upfront because there is no guarantee I will get a full-time job after I graduate. If I paid my debt upfront and then decide to live in a monastery for the rest of my life or if I decide to live in the wilderness or even if I find it too difficult to get a job, then I will have paid off the debt for nothing.

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