How much of your pay goes to your study loan?

Two clocks are running

Money for this debt leaves your pay every cycle. The balance you can look up barely moves for months, and then changes twice within a few months of each other, late in the year. Both of those observations are correct. They are measurements of different things, taken by clocks that were never set to each other, and most of what surprises people about a study loan comes from reading one as if it were the other.

The calculator above runs the first clock, because that is the one that decides what reaches your account this fortnight. The table it draws afterwards runs the second. Everything below is about how the second one behaves, since it is the clock nobody explains and the one that makes the balance look wrong.

The yearly adjustment is not interest

Nothing is charged on this debt for the use of the money. Once a year the balance is restated so it keeps pace with what money is worth, which is a different operation with a different purpose, and the distinction is not a technicality. Interest accumulates while you go about your life. This does not. There is no rate ticking between one June and the next, and nothing compounds inside the year.

The restatement lands on the first of June, and it reaches the part of the balance that has been sitting there for more than eleven months. Anything more recent is left alone until the following year. There is nothing more to it than that, and the shape is worth holding on to, because the next section is about what the balance happens to look like on the day the restatement arrives.

Why the official figure looks out of date

Look up your loan in the middle of the year and it will not show a cent of what has come out of your pay since July. Nothing has gone missing and the website is not behind. Amounts withheld for this debt are held against a bill that has not been worked out yet, and they are applied to the loan only when your return for that year is processed. Until that happens the loan is, as far as the account is concerned, exactly the size it was in July.

Put the two sections together and the ordering is the part worth knowing. The restatement in June is applied to a balance that has not yet been told about the year you just worked. This is the same habit the tax line on your payslip has, an estimate paid forward and squared up later; the guide to reading a payslip takes that apart line by line.

The payment that does land straight away

A voluntary payment is a different kind of event. It is not held against anything and it is not waiting for a return to be lodged. Once it is processed the balance is smaller, and it stays smaller. Made before the first of June, it shrinks the figure the restatement is applied to.

That is the only place on this page where timing is something you decide rather than something you watch. Whether the money is better used there than anywhere else is a question about your whole situation, not about this debt, and the table above is no help with it: the projection assumes compulsory amounts only, so a voluntary payment simply does not appear in it.

Where to spend your attention

Worth your attention: the income the compulsory amount is worked out from. It is drawn deliberately wider than the figure your tax was worked out from, and it picks up amounts that never appeared on your assessment as income at all. Reportable fringe benefits count, whether or not your employer is exempt from the tax on them. So do net investment losses, including a loss on a rental property. So does foreign employment income that was exempt from tax here. The questions below deal with the super side of that list.

Not worth your attention: the exact adjustment figure. It is announced once a year, it applies to everyone with a loan, and no decision of yours changes it. The payoff year in the table deserves the same treatment. It is an orientation built on your income staying where it is today, which is the one assumption almost nobody satisfies, and it moves the moment your income does.

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