HECS debt has grown, so here’s how it affects home loans

The federal government’s Higher Education Loans Program (HELP), which you probably know as HECS debt, has grown so much over the years that it now affects people’s eligibility for home loans. As if grabbing a house didn’t already seem impossible.

According to Guardian Australia, 72% of people with HELP or HECS debt owe the federal government more than $20,000, which is a huge jump from previous years. In 2005, only 47.51% of people owed more than $20,000. According to the ATO, the number of people who owe more than $50,000 in HECS or HELP debt has also increased.

There are many reasons debts are on the rise: rising college prices, changes in repayment requirements and, of course, inflation – just like all the other cost-of-living dramas. Debts rose 3.9% in June alone, according to Guardian Australia.

Obviously, it sucks to be in debt. It sucks even more to be in debt of tens of thousands of dollars, which is growing at a faster rate than you can afford. Mostly because the government has reduced repayment requirements over the years, which means you may have to start paying off your HECS debt on a pretty meager salary (currently it’s $48,361), which doesn’t doesn’t really help you save money.

But now, due to the scale of many HELP debts, people are also finding that it is affecting their (already shaky) chances of buying a home.

“It’s more of a liability than before,” Mortgage Choice said. David Thurmond said Guardian Australia.

“I’ve been a broker for about 15 years and when I started HECS debt was quite rare.

“If there was a debt, it was quite small, maybe $5,000 or $10,000. This has increased over the years and we are now seeing average debts of $20,000 to $40,000.

Thurmond said having such a large debt hinders your ability to get a big loan – which you would obviously need if you were trying to mortgage a house.

“The HECS repayment is like a credit card payment or a car loan – it’s a liability that banks have to take into account, so it will decrease your ability to borrow,” he explained.

He said once upon a time, your repayment plan wouldn’t be much of an issue if you opted for a mortgage.

“Refunds were never a problem – if we had them, they were a refund of $20 to $100 a month,” he said.

“But now it’s like a $700 a month refund.”

Fucking yuck.

Thurmond said some people choose to pay off their HELP debt before buying a home so they can get a bigger home loan — but obviously not everyone is in that position.

Who knew that in the year 2022 of our Lord, we would have to choose between going to school or owning a house. Love this for us!

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