With many young Australians about to start their University journey in the coming weeks, families across Australia are turning their attention to what the year ahead will financially look like.

According to recent ABS data, nearly 70 per cent of Australians aged 20 to 64 years had attained at least one non-school qualification (such as a University Degree). In fact, many roles in today’s competitive job market look favourably upon, and in some cases require, an undergraduate and sometimes even a postgraduate qualification.

But University education, like all education, isn’t cheap. In fact, the latest ABS Household Expenditure Survey noted that the most significant increase in household spending was in education, which has jumped by 44 per cent in six years.

It’s clear that the cost of education is as significant for families as the big-ticket cost-of-living considerations such as housing affordability, healthcare, insurance, childcare, and aged care.

With the cost of an average bachelor degree starting at $15,000, and a postgraduate masters degree costing up to $37,000, it’s also safe to say young Australians are carrying bigger debts than ever before.

Now more than ever, it’s essential that families include education on the list of life stage expenses, and plan not just for primary and secondary school, but also university.

But isn’t that what HELP Loans are for?

It’s true that the Government’s HELP scheme is intended  to assist students with funding their University studies. While this is provided through a no-interest loan, a HELP loan, however, is subject to annual indexation after the debt is more than 11 months old, and it is still a debt that needs to be repaid.  

Students start paying off their HELP debt once their income is above the compulsory repayment threshold. It’s a system based on the simple principle — the more you earn, the more you pay back. The mandatory repayment threshold for the 2018-2019 income year is $51,957, with the 2019-2020 income year dropping to $45,881.

When it comes to managing a HELP debt, there isn’t really a right or wrong answer about paying it back sooner or later. In reality, repaying a HELP debt means that there is less in the pay packet to spend and save on other things. Reducing the HELP debt can be a sensible way for young Australians to get into the habit of saving and better prepare themselves for the expenses that will hit them later in life, such as mortgages, healthcare, childcare and retirement.

What about the Bank of Mum and Dad?

Outside of the top 4 banks, your mum and dad are the biggest lenders in Australia.

According to a new survey from comparison website Mozo, more parents than ever are helping their kids buy their first home by allowing them to live at home rent-free or contributing to their deposit in the form of a gift or loan*.

While this generosity goes a long way to getting first homeowners into the property market, it’s always worth thinking about the best way to get value out of a generous cash gift like this. Up-front contributions towards University fees or even helping with additional HELP repayments are also value-adding contributions that should be considered.

Preparation is key

Australians take a strategic approach to their investment strategy as it relates to superannuation, property, shares and other major asset classes — yet there’s a growing gap between rising education costs and families’ ability to fund it.

We recommend starting early, saving often, and having an investment that offers growth potential and tax benefits to help with some of the heavy lifting. It’s never too late to start planning and saving for education.

* https://www.homeloanexperts.com.au/blog/news/bank-of-mum-and-dad/

By Adnan Glinac, Executive General Manager, Life & Super

Disclaimer: This article is not legal or personal financial advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every reasonable care has been taken in distributing this article, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information contained within it. Any views expressed are those of the author(s) and do not represent the views of Australian Unity Personal Financial Services Ltd. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Taxation Information in this document should not be relied upon without seeking specialist advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in December 2018. © Copyright 2018