Speaker 1: Hello, my name's Santasha Nabananga Bamblet. I'm a proud Yr
Speaker 1: the Order Kerni Whaltbury and a waddery woman. And before
Speaker 1: we get started on She's on the Money podcast, I
Speaker 1: would like to acknowledge the traditional custodians of the land
Speaker 1: of which this podcast is recorded on a wondery country,
Speaker 1: acknowledging the elders, the ancestors and the next generation coming
Speaker 1: through as this podcast is about connecting, empowering, knowledge sharing
Speaker 1: and the storytelling of you to make a difference for
Speaker 1: today and lasting impact for tomorrow.
Speaker 2: Let's get into it.
Speaker 3: She's on the Money, She's on the Money.
Speaker 2: Hello, and welcome to She's on the Money, the podcast
Speaker 2: us that digs into finance news you actually care about
Speaker 2: in a way you can actually understand. I'm Victoria Devine,
Speaker 2: your finance friend with all the tea, and today I'm
Speaker 2: spilling on what's probably the juiciest headline of the year
Speaker 2: for anyone who's still feeling the very heavyweight of their
Speaker 2: hex or help debt. Today I'm going to be chatting
Speaker 2: with you about an Australian government proposal that could mean
Speaker 2: a twenty percent cut on your student loan balance, which
Speaker 2: sounds very very good, and let's be real, for most
Speaker 2: of us, that's not just news that's life changing. However,
Speaker 2: my friends, there is actually a lot to unpack here,
Speaker 2: from what these changes actually mean for your repayments to
Speaker 2: how they could affect your budget in the long run.
Speaker 2: So my friend, grab a coffee, sit tight, and let's
Speaker 2: break it down together. All right, So here's the lowdown
Speaker 2: on the HEX and Help changes. First, the headline graber
Speaker 2: a twenty percent reduction on all outstanding student loan balances
Speaker 2: if the Labor government is re elected. This is going
Speaker 2: to take effect on the first of June twenty twenty
Speaker 2: five and apply to everyone with a HEX or Help
Speaker 2: debt VET or similar student debt. Let's break down what
Speaker 2: that actually means with some numbers, though, because stats girl
Speaker 2: and we have done some maths. So first, a twenty
Speaker 2: percent debt reduction. Say you're an average oozy grad with
Speaker 2: a HEXDET of twenty seven thousand, six hundred dollars. Under
Speaker 2: this new plan, you're going to get twenty percent of
Speaker 2: that balance completely wiped out. So instead of owing twenty
Speaker 2: seven thousand, six hundred dollars, you'll see about five and
Speaker 2: a half grand raised from your debt. That brings your
Speaker 2: outstanding balance down to twenty two than one hundred dollars,
Speaker 2: which is not too shabby, right. Or Let's say you're
Speaker 2: getting through your repayments and you only have ten grand
Speaker 2: left on your HEX debt. You'll see a two thousand
Speaker 2: dollars reduction, dropping your total to eight grand. Now, let's
Speaker 2: sideline a little bit and have a quick chat about
Speaker 2: the higher repayment threshold that's been proposed. The next change
Speaker 2: is the repayment threshold, and that's the minimum amount you
Speaker 2: need to earn before HEX repat's stuck getting taken out
Speaker 2: of your pay It sounds good on the surface right
Speaker 2: right now, you start repaying your HEX stet once you're
Speaker 2: earning over fifty four, four hundred and thirty five dollars
Speaker 2: a year. But with this new plan, that threshold is
Speaker 2: going to rise to sixty seven thousand dollars. So let's
Speaker 2: go in with an example. Say you're a recent grad
Speaker 2: and you're making sixty grand a year. You're currently just
Speaker 2: above the threshold and would be paying a portion of
Speaker 2: your income towards your HEX SDET every single pay cycle.
Speaker 2: But under this new proposed system, you'll actually full blow
Speaker 2: the threshold and won't need to start paying back your
Speaker 2: HEX until you earn above sixty seven thousand dollars. That's
Speaker 2: extra cash in your pocket right now to help with
Speaker 2: rent and bills, or maybe even just saving up for
Speaker 2: a big goal, which sounds, as I said, on the surface,
Speaker 2: really good. I have a lot to say and it'll
Speaker 2: all make sense, but there are a few things that
Speaker 2: I want to get through before we dive into a
Speaker 2: deeper part of the conversation. So let's touch on the
Speaker 2: cost of living benefits really quickly. So what do these
Speaker 2: changes mean day to day? Of you're going to feel
Speaker 2: a little bit less pressure when it comes to rent
Speaker 2: and bills. But let's say you're making sixty five thousand
Speaker 2: dollars a year. Currently, you're going to be required to
Speaker 2: make X repayments, which are probably around two thousand dollars
Speaker 2: a year depending on your exact income bracket. With this
Speaker 2: new threshold, you'd get to keep that two grand in
Speaker 2: your pocket, and in today's economy, that cash could go
Speaker 2: towards your rising grocery bills or rent or saving up
Speaker 2: for your first home. But if you're earning just over
Speaker 2: that threshold stay sixty eight thousand dollars, your repayments will
Speaker 2: still be smaller than before thanks to the new twenty
Speaker 2: percent debt reduction, meaning that your overall balance and yearly
Speaker 2: repayments are reduced. Sounds kind of sexy, right these changes.
Speaker 2: They do come at a time when the cost of
Speaker 2: living it feels like it's squeezing us all. So for
Speaker 2: some this could be a really real relief. By bumping
Speaker 2: up this payment threshold, many of us would have a
Speaker 2: little bit more breathing room each month before our student
Speaker 2: debt started kicking in, and that twenty percent reduction, that'sands
Speaker 2: of dollars that you don't have to worry about anymore.
Speaker 2: But as with anything money related, it's really important to
Speaker 2: know the details so that you can decide the best
Speaker 2: way to approach your repayments in the long run. After
Speaker 2: the break, I'm going to deep dive into the nitty
Speaker 2: gritty of how these changes actually play out across different
Speaker 2: income levels. At first glance, lowering the minimum repayment sounds
Speaker 2: like a win for your budget, right, But there's a
Speaker 2: little bit more to the story. Stick around, because what
Speaker 2: seems like short term relief might actually have a few
Speaker 2: unexpected twists. All right, my friends, we are back and
Speaker 2: I'm excited to talk about this. It is time to
Speaker 2: get into the nitty gritty of how these changes actually
Speaker 2: play out across different income levels. At first glance, lowering
Speaker 2: the minimum repayment sounds great for your monthly budget. Everybody
Speaker 2: wants a little bit more wiggle room. But when you
Speaker 2: take a closer look, for a lot of people, it
Speaker 2: could mean holding onto that debt for much longer. Now, obviously,
Speaker 2: in true Victoria divine fashion, we have an entire spreadsheet.
Speaker 2: I'm going to dive into exactly what that looks like. Though.
Speaker 2: For incomes at the lower end of the scale, like
Speaker 2: sixty thousand dollars and seventy thousand dollars, the new minimum
Speaker 2: repayment requirement is either zero dollars or it's been significantly reduced,
Speaker 2: so for example, four hundred and fifty dollars annually for
Speaker 2: seventy thousand dollars a year. This reduction essentially delays repayment,
Speaker 2: especially for those earning sixty thousand dollars, where the debt
Speaker 2: theoretically would never be paid off under minimum payments alone. Previously,
Speaker 2: someone who earned seventy grand a year would have made
Speaker 2: an annual payment of seventeen hundred and fifty dollars, which
Speaker 2: would allow them to pay off their debt if they
Speaker 2: remained at that income level in about fifteen point eight years. Now,
Speaker 2: under this new proposal, the drastically reduced payment of four
Speaker 2: hundred and fifty dollars leads to an indefinite repayment timeline
Speaker 2: so forever, as it doesn't actually keep pace with the
Speaker 2: debt growth. Let me talk to my spreadsheet for a
Speaker 2: hot second. So let's pretend you have graduated, right, So
Speaker 2: if this comes into effect on the first of June
Speaker 2: twenty twenty five, you'll get your twenty percent reduction, which
Speaker 2: arguably is very exciting at this point in time, and
Speaker 2: then the new monthly minimum repayments will apply. Right. So
Speaker 2: we've done some maths in the background, and I have
Speaker 2: used the number of thirty thousand, seven hundred and sixty
Speaker 2: three dollars because that is the average textet of somebody
Speaker 2: in their twenties, right, So this number is what I'm
Speaker 2: always going to fall back on. As of the first
Speaker 2: of June twenty twenty five, if you get your twenty
Speaker 2: percent deposit, that will mean that your text stet drops
Speaker 2: to twenty four thousand, six hundred and ten dollars. That
Speaker 2: is now the number that I'm going to be talking
Speaker 2: about because that's your post twenty percent discount. Right. So historically,
Speaker 2: if you earned sixty thousand dollars, your old minimum and
Speaker 2: your repayment would have been six hundred bucks, right, And
Speaker 2: that means if you extrapolate that out, it would have
Speaker 2: taken you forty six years to pay that debt off. Okay,
Speaker 2: So now we go back to this sixty thousand dollars income.
Speaker 2: You now have twenty four thousand, six hundred and ten dollars.
Speaker 2: But because of the new minimum monthly repayment threshold, you
Speaker 2: no longer make any hextet repayments, which means, hypothetically, you're
Speaker 2: never going to pay off your hextet. Now, is that
Speaker 2: the worst thing in the entire world if you never
Speaker 2: plan on earning over sixty thousand dollars. Absolutely not. We
Speaker 2: do have to think of a few things here though. One,
Speaker 2: if you are ever going to get property, your hextet
Speaker 2: is ultimately going to reduce how much you're able to borrow.
Speaker 2: But also, on the bright side of things, a hex
Speaker 2: and help debt is the only type of debt in
Speaker 2: Australia that dies with you, So it's not going to
Speaker 2: be passed on to anybody else, it's not going to
Speaker 2: be taken out of your estate when you pass along.
Speaker 2: It is something that is going to just cease to
Speaker 2: exist at the end end of your life, which sounds
Speaker 2: a little bit morbid, but I think it's really important
Speaker 2: to preface it there too, because a lot of us
Speaker 2: get really stressed about the idea of carrying debt and
Speaker 2: then passing debt on. Right. Let's jump up though, because
Speaker 2: if you're on an income of seventy thousand dollars per annum,
Speaker 2: historically your old minimum repayment was seventeen hundred and fifty
Speaker 2: dollars a year, which means it would have taken you
Speaker 2: fifteen point seven seven years to pay off, which is, honestly,
Speaker 2: in the grand scheme of things, not that bad. However,
Speaker 2: your new minimum monthly repayment as of the first of
Speaker 2: June twenty twenty five will change to four hundred and
Speaker 2: fifty dollars per annum, which means you'll never pay off
Speaker 2: your hextet. You will literally be paying off your hex
Speaker 2: debt every single year. But because of the average rate
Speaker 2: of indexation, which I have used the number two point
Speaker 2: seven because that is the average rate of indexation historically.
Speaker 2: It means you're never going to pay off your debt,
Speaker 2: but you will be paying that debt off every single year.
Speaker 2: But because of the rate of indexation, you are actually
Speaker 2: going to recrue more debt each and every single year,
Speaker 2: even though you're paying off the minimum repayments. If we
Speaker 2: jump up to eighty thousand dollars a year, your old
Speaker 2: minimum repayment or as it is right now today is
Speaker 2: twenty eight hundred dollars a year, it means that in
Speaker 2: just under ten years, so nine point eight five years,
Speaker 2: you will be able to pay off the entirety of
Speaker 2: your hex stet. However, your new minimum monthly repayments as
Speaker 2: of the first of June twenty twenty five, will be
Speaker 2: nineteen hundred and fifty dollars, pushing your years to pay
Speaker 2: that debt off up to fifteen years and six months
Speaker 2: at the end of the day. This means that you
Speaker 2: are ultimately going to be paying more indexation over that
Speaker 2: period of time, and it is going to stay with
Speaker 2: you even longer. This obviously extrapolates out all the way
Speaker 2: up to incomes of one hundred and seventy nine nine
Speaker 2: hundred and ninety nine dollars, because anything above one hundred
Speaker 2: and eighty thousand dollars means that there will be absolutely
Speaker 2: no change. But I think you're starting to see my point.
Speaker 2: And my point is, even with a very attractive twenty
Speaker 2: percent discount and the fact that your minimum monthly repayments
Speaker 2: are dropping, it sounds all really good because we all
Speaker 2: want cash in our back pocket to spend on bills
Speaker 2: and rent. Like life is tough. Ultimately, this debt is
Speaker 2: either going to never be paid off under this new scheme,
Speaker 2: or it's going to take significantly longer, which is going
Speaker 2: to impact your ability to create wealth over the long term,
Speaker 2: which to me is the most concerning part of this,
Speaker 2: right because ultimately my job is to help you create
Speaker 2: wealth and keep wealth and put you in the best
Speaker 2: possible financial position. And I think there's been a lot
Speaker 2: in the media about this being super positive. Who doesn't
Speaker 2: want a twenty percent discount on their hecks. I know
Speaker 2: I'm going to welcome that, but that doesn't actually mean
Speaker 2: that you're in the best possible position. The other thing
Speaker 2: that slightly frustrates me is this is a one time discount,
Speaker 2: So right now, if you're at university or you're planning
Speaker 2: to start universe, you're not going to benefit from this
Speaker 2: at all. And those calculations that I used were based
Speaker 2: on that twenty four thousand figure, not the thirty plus
Speaker 2: thousand figure. It's going to take you even longer to
Speaker 2: pay off your debt with lower minimum repayments. So to
Speaker 2: summarize all of this, what does it all mean for
Speaker 2: those in lower and middle income brackets. The new system
Speaker 2: gives you arguably immediate relief by lowering repayments, which can
Speaker 2: help with current cost of living pressures. But on the
Speaker 2: flip side, sticking to these minimum repayments could mean carrying
Speaker 2: that debt for years longer than you might have under
Speaker 2: the old rules, and that doesn't sit well with me.
Speaker 2: Maybe the extra breathing room is exactly what you need
Speaker 2: right now, and it's not a bad thing to say. No, V,
Speaker 2: I don't even care about having this debt for longer.
Speaker 2: I need a little bit of wiggle room in my budget.
Speaker 1: Go.
Speaker 2: I get it, I really do, and that's great. But
Speaker 2: if you're thinking long term, you might decide to chip
Speaker 2: away at that debt a bit faster to free yourself
Speaker 2: up sooner. It all depends on what your values are
Speaker 2: and what you're working towards. Importantly, you need to remember
Speaker 2: that this isn't a one size fits all solution. It's
Speaker 2: about understanding how these changes impact you personally and making
Speaker 2: a choice that aligns with your own goals and values.
Speaker 2: And over the last week my dms have absolutely blown
Speaker 2: up with people going V, I'd love to see the stats. V.
Speaker 2: I'd love to see the numbers. V. This doesn't sit
Speaker 2: with me. Well, I know the idea of a twenty
Speaker 2: percent discount is really good, but what does this mean
Speaker 2: for me holding debt for longer? You went wrong. I've
Speaker 2: done the numbers and it does put you in a
Speaker 2: worse off wealth position in the long term. When we
Speaker 2: posted about the news on Instagram on the She's on
Speaker 2: the Money account, a lot of you were really quick
Speaker 2: to ask why the new rate of indexation that was
Speaker 2: announced hasn't been applied yet, and fair enough because it's
Speaker 2: super confusing. But here's the down low. While the government
Speaker 2: announced that they're lower the indexation rate, the actual legislation
Speaker 2: and mayke it official hasn't been passed through parliament. Yet
Speaker 2: that means that right now the old indexation rate is
Speaker 2: still in effect and we're all waiting for that fine
Speaker 2: stamp of approval. If it does pass, the ATO will
Speaker 2: apply that low or rate retroactively, and anyone eligible could
Speaker 2: see a credit or a refund, which is kind of attractive.
Speaker 2: So hang tight and we'll keep you updated as things develop.
Speaker 2: She's on the Money we are all about giving you
Speaker 2: the tools to take control even when changes come flying
Speaker 2: at you. If you found my breakdown helpful, please be
Speaker 2: sure to subscribe. I am literally here to make the
Speaker 2: money stuff easy for you, and I want to say
Speaker 2: that I want to make it fun along the way,
Speaker 2: But right now this doesn't feel that fun. So I
Speaker 2: hope you have a beautiful weekend. If you have any questions,
Speaker 2: always slide into our DMS. And if you've listened this far,
Speaker 2: I'm going to upload the spreadsheet of all of my
Speaker 2: working out to the website so you can download it
Speaker 2: and have a little bit of a snoop see you later, guys.
Speaker 2: Did By shared on She's on the Money is generally
Speaker 2: nature and does not consider your individual circumstances. She's on
Speaker 2: the Money exists surely for educational purposes and should not
Speaker 2: be relied upon to make an investment or financial decision.
Speaker 2: If you do choose to buy a financial product, read
Speaker 2: the PDS TMD and obtain appropriate financial advice tailored towards
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