Re: HECS

hey robbie,

i actually found that really itneresting, but right at the 
end you lsot me!

could you restate your findings as if you were telling a 5 
year old? (my brain has yet to switch on after 3 months of 
holidays!)
Cheers,
Love Jen


We are given:
the hands of Christ to work with,
the heart of Christ to love with, and
the mind of Christ to illuminate the world...


---- Original message ----
>Date: Tue, 10 Feb 2004 06:12:22 -0000
>From: "Robbie Barnett" <r.barnett-oe7qfRrRQfch4f/j4+b0/[email protected]>  
>Subject: [A List] HECS  
>To: [email protected]
>
>
>Hello,
>
>This is not financial advice, I'm just bringing this up 
because I 
>can't find anyone else to discuss it with.
>
>I'm wondering if anyone else has done the math about 
repaying their 
>HECS/PELS debt. For the last few years I've thought it to be 
>completely useless to pay off the debt and instead I should 
save the 
>money and earn interest on it.
>
>Common sense says that you are better off saving your money 
in an 
>diversified fund earing 7% interest p/a than repaying a loan 
that 
>increases by only 3% p/a. But, the govenment threw a spanner 
in the 
>works by offering to pay an additional 15% to any repayment 
over $500.
>
>I wrote a little program to work out which is better and 
here are the 
>results. This program doesn't take into account the 
compulsory 
>repayments.
>
>Lets say I have a $25000 debt. Indexation is at 3% but 
interest can 
>be earned at 7% in a diversified fund. I aim to repay off my 
debt in 
>perhaps 10 years.
>
>The repayments required per annumn is $2845
>However, due to the 15% bonus I only need to pay $2474
>
>If I were to put the same amount ($2474) per year into an 
investment 
>I would be able to aquire $34185 over the 10 years.
>
>Over 10 years, the HECS debt would have indexed up to 
$32619. Now, 
>taking the 15% bonus into account I would have to pay a lump 
sum of 
>$28364.
>
>Summarising:
>The $34185 I managed to aquire over the 10 years, was much 
more than 
>the indexation of my HECS debt, which now only requires a 
$28364 lump 
>sum payment. That just saved me $6000 dollars.
>
>Doing some more maths shows that for ANY HECS/PELS debt 
assuming an 
>indexation of 3% and a diversified fund performing at 7% p/a 
saves 
>you 20% over a 10 year period.
>
>I haven't seen much advice on the internet about the merits 
of 
>investing instead of paying off your HECS debt. I should 
also take 
>into account that the 15% rebate might not last forever, and 
that the 
>Howard Govenment might introduce competitive interest rates.
>
>Anyway it's just food for thought.
>
>
>
>
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>
> 
>Yahoo! Groups Links
>
>
>
> 
>
>



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