HECS debt - a powerful incentive to study

I look at student education in the United States and compare student debt in the US to rising student debt levels in Australia through HECS; that is, the higher education contribution system. The advantage in the Australian system is that you can borrow money from the federal government at zero interest rates to fund your education. All in all, this is the lowest cost loan most people will have in their life.

Commonwealth supported places is the term given to qualifications available at Australian universities normally at undergraduate level. Most postgraduate places are full fee paying, that is, you have to organise your own funding in such a case. The advantage is that in HECS; repayments don't start until you are earning in excess of $51,000 with repayments varying between 4% - 8% of your income.

The real advantage of HECS is that you are not charged interest, a free loan in many respects. However, the debt is indexed yearly so as to not allow inflation to diminish value of the loan. I believe education should have some cost, when you graduate, you have the ability to earn a good income but this of course varies between qualifications. 

Humanities and arts graduates generally earn incomes towards the lower spectrum of the range whilst medicine, engineering and technical graduates earn incomes in the higher range. That is not to say humanities and social sciences are any less important than technical areas, the employment market currently decides values. Likewise, repayments should be lower in relation to future earning potential.

HECS debt repayments are managed through the Australian Taxation Office (ATO); widely rumoured to have never lost a customer in their monopoly position. Normally, a call to the ATO takes over an hour, it is of course worth the time spent as the ATO is more than willing to hand out substantial fines - I know this when I learnt the hard way. 

Paul Hogan once described the ATO as a bunch of miserable bastards - I concur. I pity the American system where huge loans are required at commercial rates; my friends living in the US explain to me the job markets is still soft making payment of these loans difficult, that being said, interest rates in the US are still lower than in Australia.

The average HECS debt takes 8 years to pay off, however, many of my friends have HECS loans in the $30,000 - $40,000 range, that's a pretty big bill. For me, a strong incentive to gain a technical trade qualification initially before moving to university part time whilst working full-time. 

I have been lucky, I paid my university fees as I went and my degree is fully paid before it is completed. I also claim the costs on my tax as a deduction and this helps to lower my tax. Having completed an a technical apprenticeship as a young guy; I worked full-time for minimal wages for 4 years subsidising my own training. 

Of course, further night school in my own time and at my cost added to a further series of bills I paid over the years. I believe I could put a strong case forward that the four years of my apprenticeship and beyond increased my earning potential, paid for in current earnings and supported by tax receipts.