Student debt falls in value
Student loans have become worse value for money, raising the importance of parents helping their children get as much educational bang for their buck as possible.
They are worse value for three reasons.
One: The loans young people are being forced to take out are increasing in size.
Two: The salaries in years one, two, three, four and five are dropping as a percentage of national median earnings.
Three: As a result, repayments take longer.
The median repayment time for all borrowers was 8.4 years, the 2016 student loans annual report says.
In 2011, it was seven years. This year’s figures are yet to be published.
The basic truth holds: It is worth investing in education. But the stakes are getting higher each year.
Youngsters must borrow cautiously, choose their study
wisely, and then choose how they spend their first 5-8 post-study years wisely.
There’s something a little overly red-blooded in the education industry at the moment.
There’s intense competition for bums on seats. The industry has its eyes firmly on the dollars.
Students are their customers. Student loans are the means they get paid.
There are some students coming out of courses with debts that’ll take 20 years to pay off, and qualify the borrowers for a job paying near minimum wage.
A quarter of bachelors and graduate diploma students are forecast to take the better part of 15 years to repay their debts.
We’ve all conveniently ‘‘forgotten’’ student loans are being shovelled out to young people who lack experience and worldly wisdom. And we wonder why there have been so many defaults.
Our young people desperately need their parents and wise elders to help them make the choices
‘‘There's something a little overly redblooded in the education industry at the moment.’’
that will get them the best-value education.
For some, the best choice is an apprenticeship, or to go straight from school into the workforce. Studying part-time while working is an option.
The key elements of getting good value for student debt are simple: Get as good a qualification as you can for the lowest debt you can.
Pre-saving as many of the costs as possible is sensible. So is working part-time during study.
Every dollar less borrowed makes a young person’s qualification more valuable, and their future easier, especially if they want to end up on the right side of the property divide before they start a family.
Do not think help keeping the debt down is the end of it, either. When they finish their study, people who head overseas start incurring interest, and their forecast repayment times are much longer.
‘‘Overseas-based borrowers have expected repayment times more than twice as long as New Zealand-based borrowers,’’ the last student loans annual report says.
Young adults with wanderlust may need help understanding that.
Remember, if they don’t get wisdom from you, they will get it from their friends, who have as little experience as they do.
Your student offspring’s friends. They may be fun, but they’re not necessarily founts of financial wisdom.