Rising HELP Debt: Should You Pay It Off Early?

With the recent surge in HELP debt by 7.1% in June, many students and graduates are left wondering whether paying off their debt early is a wise financial decision. While there are benefits to paying off debt sooner, it's crucial to carefully evaluate your individual circumstances before making a decision. In this blog post, we will explore the pros and cons of paying off your HELP debt early, helping you make an informed choice that aligns with your financial goals.

The Benefits of Early Repayment

  • Interest Savings: One of the primary advantages of paying off your HELP debt early is the potential to save on interest. By reducing the overall balance sooner, you minimize the amount of interest that accumulates over time. This can result in significant long-term savings, allowing you to allocate your funds towards other financial goals.

  • Financial Freedom: Paying off your HELP debt early frees up your income for other purposes. Once your debt is cleared, you have more disposable income available to save, invest, or pursue other endeavors. Achieving financial freedom earlier can provide you with greater flexibility and peace of mind.

Factors to Consider

  • Other Debts: Before focusing on paying off your HELP debt early, evaluate your other financial obligations. If you have high-interest debts, such as credit cards or personal loans, it may be more beneficial to prioritize their repayment first. Compare the interest rates of all your debts to determine the most cost-effective approach.

  • Financial Stability: Consider your current financial situation and stability. If you anticipate any major life events or expenses in the near future, such as buying a home, starting a business, or pursuing further education, it might be wise to allocate your funds towards those goals rather than early HELP debt repayment.

  • Other Financial Goals: Assess your broader financial goals and priorities. If you have long-term savings objectives, such as retirement planning or building an emergency fund, it may be more beneficial to allocate funds towards those goals instead of paying off your HELP debt early. Remember to strike a balance between debt repayment and saving for the future.

  • Interest Rate and Inflation: Keep in mind that HELP debt is indexed each year based on the Consumer Price Index (CPI). This means that the debt increases annually to account for inflation. If the interest rate on your HELP debt is relatively low compared to other debts or potential investment returns, it may be financially advantageous to focus on those areas instead.

Consultation and Professional Advice

If you are unsure about whether paying off your HELP debt early is the right choice for you, consider seeking advice from a financial professional. If you are a Strategem client, we can assess your specific circumstances, provide personalised guidance, and help you weigh the pros and cons of early repayment.

So, should you pay if off early? 

The decision of whether to pay off your HELP debt early is a personal one that should be based on your unique financial situation, goals, and priorities. While early repayment can lead to interest savings and financial freedom, it's essential to consider other debts, financial stability, and long-term objectives before making a decision. 

Seek professional advice from your Strategem Accountant, and remember that financial decisions should always align with your overall financial well-being.

We are here to help

If you need further advice on this topic, please do not hesitate to contact our office on (03) 5445 4777 and one of our Accountants will be available to support you.

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