Discount for voluntary payments of HECS being scrapped?

[peanutter]

Historically, if you make a voluntary payment against your HECS in an amount over $500, an extra 5% is taken off. So if you need to clear $6K, and that's going to be cleared by your taxable HECS payment in the next financial year, you pay $5,700 odd voluntarily, and save $300. Done.

Generally, I've preferred to have any extra sitting happily in my redraw, reducing my mortgage and all that, as the mortgage interest % versus the interest on the HECS (CPI) has been preferable.

But the suggestion that they're removing the 5% reduction for voluntary payment from 1 January 2014 onwards gave me pause (not menopause - the Australian Government can't do that ... yet ...).

So I crunched the numbers (did an excel spreadsheet and everything, like a boss ... yes, I am badass) and I'll be paying an extra $800-900 if I don't voluntarily pay it out tout-suite.

But I haven't found anything concrete saying that yes, it's definitely getting scrapped.

Anyone actually know?

[Trillian]

I don't know for sure, but I do know that for the past few years the Govt has been reducing the discount amount you get if you pay upfront for your fees, so I wouldn't be surprised if they are changing this.

[Rowellen]

I thought they definitely were scrapping it all together. I'm sure I've come across it somewhere in my ATO emails. I'm a tax agent so I get a lot of them! I was kind of surprised as the incentive to pay it out early is now completely gone! I'm like you PN, even with the current interest rates so low, I'd rather the money on my mortgage than in the govt's hands! Last year was the first time I've had to pay it since about 2006.

[Jennifer13]

Thanks for flagging, peanutter. I don't think I have any left, but my tax return was just done, so I'll double check when it comes through.

[Liminal]

This seems to be true. You won't get a bonus for paying upfront, or for extra voluntary repayments on your existing debt:

Subject to the passage of legislation, from 1 January 2014, the Australian Government will remove the upfront HECS-HELP discount of 10 per cent for eligible students that pay their student contributions upfront and the voluntary HELP repayment bonus of five per cent.

Changes to the HECS-HELP discount and voluntary repayment bonus - Study Assist

[Liminal]

The previous change was in 2012 and dropped the voluntary repayment bonus from 10% to 5%: Changes to voluntary repayments - Study Assist

[peanutter]

I'd better decide fast whether or not to do it voluntarily!!

Saving $8-900 is worth it of course ... but not having access to my redraw is a scary prospect - you never know what's around the corner!!