The Barefoot Investor has insisted HECS is a ‘good debt’ after a mother revealed her son had racked up $85,000 and was struggling to find work.
Megs wrote to Scott Pape to say her 33-year-old son was left with the huge loan after studying two degrees.
She said her son was employed full-time, but not in the industry he had studied for and that the debt felt like a noose around his neck.
He doesn’t earn enough to repay his loan and has serious doubts about his ability to afford a home in the near future.
Meg said his self-esteem has plummeted and that he wishes he did a trade like his brothers had done.
The mum revealed she paid the debt herself, and wanted to warn young people not to be duped by the government loans, adding indexation only worsens the issue.
Mr Pape said her son had made the mistake of racking up a huge bill studying for something that would not set him up for the future.
‘I think the lesson for your son is a simpler one: Don’t spend $85,000 studying two degrees that you can’t find employment for,’ he said.
The Barefoot Investor has insisted HECS is a ‘good debt’ after a mother revealed her son had racked up $85,000 and was struggling to find work
‘I mean, what the hell did he study … Middle Eastern pottery?’
Mr Pape congratulated the mother on affording to repay the HECS loan herself and admitted that buying a home in Australia now banks on parents’ assistance.
But he said the loans are still a valuable option for Australian students.
‘Do I think HECS is still a good debt? Yes I do,’ he said in his home finance column penned for NewsCorp.
He said most young people enrol in universities in order to land well-paying jobs.
Though, he said the loans were not quite as fair as the deal given to most politicians’ generations who received a free tertiary education in Australia.
But, with no additional interest –aside from to be adjusted rates of indexation– and no repayment deadline, the loans aren’t an entirely poor option for Australian students.
‘That being said, you are 100 per cent right: it is yet another piece of lead in the saddlebags of young people trying to buy their first home,’ Mr Pape said.
Megs said her son doesn’t earn enough to repay his loan and has serious doubts about his ability to afford a home in the near future
‘Especially since 2022, when the government regulator changed the lending laws to require banks to take into account your HECS debt.’
He said the loans will still affect young Australians’ borrowing capacity when they decide to buy a house.
On a salary of $80,000 a year, he said, if a former student makes HECS repayments of $32,00 their borrowing power will fall by a factor of ten, about $32,000, according to Flint Mortgage Group.
He advised, with that in mind, students would benefit from paying down their HECS debt out of pocket.
He added borrowers would have to consider the payments on Lenders Mortgage Insurance, to insure the bank on your loan, totalling thousands of dollars across the span of the loan term.
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