Your Money and careers writer for the NZ Herald

How to survive your kids' student loan debts

From the cot to a hand up on the property ladder, there has never been a more expensive time to be a parent in New Zealand. Diana Clement explores the money-go-round of paying for a degree.

When Saleima Samuelu first went to university, she ended up sleeping in a van with her siblings while her dad worked.

The Samuelu family had been relatively well off in Samoa. Dad Etena was in shipping for the Tokelau Government and Mum Naomi was a medical laboratory technician.

But when the family moved to New Zealand for the sake of the children's education, it opened up a completely new financial reality.

When Samuelu enrolled at Massey University she had to watch her father work as a cleaner. Her mother no longer had family around to look after the younger children as they had in Samoa, so she couldn't work at all.

Money became so tight sleeping in the van made more financial sense than train fares home and back again. The older children slept in the van at Massey University while their father worked the night shift to save on multiple train fares home to Porirua. They had clean clothes in the van and would shower at university in the morning.

It was not sustainable - Samuelu couldn't bear seeing her family struggle financially and eventually quit her studies to help out.

A few years later, Naomi retrained and went back to work, allowing Samuelu to realise her dream of going back to university.

She enrolled at Victoria University in 2011 to study a Bachelor of Commerce, Management and Marketing.

It was still tough. Samuelu worked part time at ANZ throughout her studies. Sometimes she worked as many as 25 hours a week and the number of papers she could do each semester depended on how much she earned and saved during the holidays.

On occasion, she would stay up all night studying after finishing work and grab naps through the day to keep going.

Despite the struggles she graduated and now works fulltime - at the ANZ.

Samuelu's is perhaps an extreme example - but she is one of a huge number of young people facing tertiary study with a battle to make ends meet.

And as about 135,000 students begin university courses at bachelor level or above this week many parents will be worrying about how to pay the bill.

There has probably never been a more expensive time to be a parent.

Raising a child to 18 will cost the average parents almost $250,000, according to an Inland Revenue Department report in 2009. The figure is likely to be higher as that calculation is dated and also covered only expenses. It didn't count parents' loss of income or childcare costs.

Then, there's the almost certain demand to open the "bank of mum and dad" to get your kids on the property ladder. Even though house-price growth has slowed in latest statistics, the trajectory remains the same and there's little sign of demand for land dropping off.

But between stepping into adulthood and buying a home comes the thorny question of a university education.

It's no secret that grafting for three years for a mortar board and scroll with some letters is an expensive business - but the cost can be mind boggling for parents.

An undergraduate degree generally costs $18,000 to $25,000 a year.

Then there's the cost of living. This will mostly depend on your location but it might be $7000 to $12,000 a year - although a lot depends on a student's lifestyle and accommodation choices.

Getting a spot in a student hostel or hall of residence is likely to save a few dollars compared with a private rental.

There are lots of variables but one thing is almost guaranteed - the average student will walk out with a degree - and a hefty debt.

Consider these numbers from the latest Student Loan Scheme annual report:

Students leave university with an average debt of $16,600 to $17,220.

731,754 Kiwis have student loan debt - about 20 per cent of the population.

Bachelor's degree students borrow an average $9676.

The median repayment time for those who left study in 2014 was 8.4 years (6.45 years for those who remained in New Zealand).

The total debt stands at an eye-watering $15 billion.

More than 90 per cent say they need to borrow to pay fees.

The second-largest driver of debt is living costs.

The flipside is that recent young graduates have a clear earnings advantage in the job market, which continues to grow over time.

And this is where parents inevitably want to play their part - giving their offspring the best possible chance.

The average fees alone for fulltime students are $7054 a year, according to the New Zealand University Students' Association's most recent Income + Expenditure Survey.

The first thing to check is whether your child is one of about a third of students who qualify for a free student allowance, dependant on parents' income and other earnings.

The majority, though, must fund their education from student and other loans, family and work.

Bay of Plenty woman Amanda West separated from her husband and didn't have the money to bankroll her three children through university. All worked long hours, funding every cent of their own education.

Her oldest son worked in boat building after leaving school before moving to the UK to study for a degree in naval architecture.

Although born in the UK, he was treated as an international student and had to take a loan to cover his fees. His living costs were paid with boatbuilding work through yacht-building syndicates. He worked nights, weekends and all the way through the holidays, starting a fulltime job the day after he finished his degree.

There are other ways to help. Auckland mum Jessica Chapple paid for son Beinn to do a barista and food safety courses. The barista course gave him work and the food safety certificate made him more marketable to food-related businesses.

Another option is to look for scholarships to help students through. Not all scholarships are awarded on academic results. Some are given to students from a certain city or town, a particular ethnicity, or those in financial hardship.

Plenty of New Zealand students take up overseas academic and sports scholarships. But be warned, they aren't always as cost-free as they seem. Aucklander Jackie Rudd's son received a "full" scholarship to a mid-Western university in the United States in his first year.

But the family needed to pay $6000 a year in air fares, $2000 to top up his food credit, about $5000 spending money a year and other miscellaneous costs.

Another warning: it can be too easy for students who do receive financial support from home to spend more on entertainment and end up with the same level of debt as their flatting cohorts.

Aucklander Debbie Betts found out by accident that despite her paying her daughter's living and travel costs, her daughter was still borrowing the full $170 a week student loan "living costs", using the money for almost daily trips to Starbucks and other gratuitous spending.

"She said this is what her friends did. It was normalised in her group."

To counter this and to try and encourage her daughter to budget, Betts began charging her $50 a week board and it was agreed her daughter would reduce the weekly amount she was drawing down.

Another option is to accept the relatively low student rate loan, then assist with repayments.

That's what one Wellington dad did with his daughters.

"We've taken the view the kids' debts should be repaid once they've graduated and that that's our responsibility to them, in a nutshell."

The offspring must still make basic repayments from their earnings, but the parents pay in additional lump sums from time to time.

They don't want their children to be saddled with debt when they should be saving for a first home.

One approach to this might be to match graduates' repayments dollar for dollar, but set a time limit. For example, match repayments for the first three-to-five years, to drive savings behaviour early. What isn't paid off by the end of that period is theirs to deal with.

Parents from less well-off backgrounds often have fewer options, says Darryl Evans, chief executive of the Mangere Budgeting Centre.

The children are more likely to qualify for student allowances, but at up to $175 for someone living away from home, it's often not enough to survive.

A steady stream of the budgeting centre's clients have sent their children to Hamilton and Palmerston North where living costs are cheaper. Fee-free courses at the Southern Institute of Technology in Invercargill and Te Wananga o Aotearoa are popular. Some mine their network for whanau living close to the university so their child can board.

Evans says another option taken up by low-income families is for children to join the army or navy where they effectively receive their tertiary education for free.

One crucial thing to remember is money is just one element of support. For Saleima Samuelu, constant texts from her family urging her to succeed were an enormous help.

Uncles and aunts also helped by shopping and shouting lunches and dinners out. "I was determined and resilient and spiritually and emotionally supported in my university journey as opposed to a victim of lack of financial support."

That kind of support, says Samuelu, is priceless.

- NZ Herald

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