Barefoot Investor Scott Pape Exposes an $85,000 Mistake That Ruined a Millennial’s Dream of Owning a Home
The Barefoot Investor has insisted HECS is a ‘big debt’ after a mother revealed her son had earned $85,000 and was struggling to find work.
Megs wrote to Scott Pape to say her 33-year-old son was left with the huge loan after studying for two degrees.
She said her son had a full-time job, but not in the industry he studied for, and the debt felt like a noose around his neck.
He doesn’t earn enough to repay his loan and has serious doubts about his ability to afford a house in the near future.
Meg said his self-esteem has plummeted and he wishes he had a career like his brothers had.
The mother revealed that she paid the debt herself and wanted to warn young people not to be misled by the government loans. Adding indexation only makes the problem worse.
Mr Pape said her son made the mistake of picking up a huge bill for something that did not prepare him well for the future.
“I think the lesson for your son is simpler: Don’t spend $85,000 studying for two degrees for which you can’t find work,” he said.
The Barefoot Investor has insisted HECS is ‘good debt’ after a mother revealed her son had earned $85,000 and was struggling to find work
“I mean, what the hell did he study… Middle Eastern pottery?”
Mr Pape congratulated the mother on being able to repay the HECS loan herself and admitted that buying a house in Australia now depends on parental help.
But he said the loans are still a valuable option for Australian students.
‘Do I think HECS is still a good debt? Yes, I do,” he said in his column about housing financing NewsCorp.
He said most young people enroll in universities to get high-paying jobs.
However, he said the loans were not as fair as the deal given to most generations of politicians who received free tertiary education in Australia.
But because there is no extra interest – apart from the adjusted indexation rates – and there is no repayment term, the loans are not a bad option for Australian students.
“That said, you’re 100 percent right: It’s one more piece of lead in the saddlebags of young people trying to buy their first home,” Pape said.
Megs said her son doesn’t make enough to repay his loan and has serious doubts about his ability to afford a house in the near future.
‘Especially since 2022, when the government regulator changed lending laws and required banks to take your HECS debt into account.’
He said the loans will still impact the borrowing capacity of young Australians when they decide to buy a home.
With a salary of $80,000 a year, he says, if a former student makes HECS repayments of $32,00, his borrowing power will decrease by a factor of ten, about $32,000, according to Flint Mortgage Group.
With that in mind, he advised that students would benefit from paying off their HECS debt out of pocket.
He added that borrowers should consider payments on Lenders Mortgage Insurance, to insure the bank on your loan, totaling thousands of dollars over the life of the loan.
