Many Issues Surround Saving For Education
Many Issues Surround Saving For
Opinion piece by Jonathan Gee, Manchester Unity Friendly Society
There was a time when students young and old basked in the benefits of a free education. In those days, 'free' meant free and for university students, extras like payments for getting a Bursary meant a night on the town, or a game of poker with the flatmates.
But now, even in Nelson and even at high school, the sun no longer shines on New Zealand's 'free' education system.
Earlier this month, National MP Nick Smith revealed parents in the country's sunshine capital were paying an average of 130% more for their children's high school 'donations' than they did five years ago. Parents now fret about limiting their kids' subject choices because of the additional costs around opting for woodwork or photography above history, while school principals defend the rising costs saying they are forced into increasing fees because of inadequate Government support.
Bleaker still, is the tertiary sector, where combined student debt now totals an alarming $7 billion. New figures from the Inland Revenue Department's latest student loan quarterly report show the number of graduates who owe more than $100,000 on their student loans has nearly doubled in the past year - from 382 to 708. The figures show one borrower owed more than $249,000. The Government says it is committed to meeting the rising costs of providing a quality education system. Indeed, last week's budget increased the overall education budget from $8 billion to $8.5 billion - with dashes of funding increases (such as an additional $77.8 million increase in schools' operational funding and an extra $169 million over four years to provide 420 more teachers) in different areas. But even such significant increases fail to meet the real costs of funding the country's education needs.
Whichever side of the user-pays education debate you're on, you can't ignore the reality which is this: these days, five years at an average New Zealand state high school can cost as much as $10,000. A recent survey in the New Zealand Herald found that in 2005, while the average annual state school donation was $152 for each child across 134 state and integrated schools, some schools charged considerably more - with one school asking parents to pay $740 annually. Add to this the mounting cost of subject fees, uniforms, school camps, class trips, stationary and extra-curricular activities and any myth of New Zealand's free education system is eroded further.
The Government has already begun looking into the possibility of introducing a tertiary education savings scheme. Earlier this month, Education Minister Trevor Mallard called for expressions of interest from providers that could offer the service but no further decisions will be made until August. The idea has sparked considerable controversy and students' groups protest that the Government should be looking at lowering fees and expanding student allowances rather than getting people to save for their own or their children's education.
But right or wrong, saving for your child's education - both the secondary and tertiary years- is the only certain way of preventing your child going into debt or indeed, being in a situation where you cannot afford to offer your child the high school subject choices they prefer. The common argument is that people can't afford to save - that it is wiser to pay off debt, including a mortgage, before starting a savings regime for an education years away. Clearly, very few can afford to put aside a huge sum each week for their child's often uncertain career path.
But this is why starting saving early is crucial. For $15,000 of a tertiary education (the average student loan sits at around $14,500), a specifically designed education savings scheme asks for just $13 a week or $1.87 each day if the child is under one year old. In real terms, this works out at less than the cost of a latte every second day, or a can of soft drink each day. In other words, it's not that people need to save huge sums of money, they just need to start saving.
As with saving for anything - a home deposit, a holiday, a new car - the sooner you start to save, the easier it is to reach your goals. Choosing a plan designed for education savings is important so you resist the temptation to 'dip into' the fund. A recent survey commissioned by Manchester Unity found that while around half of parents (with children under 12) said they were saving for their children's education, just one in five people used a specific education savings account.
So let's put aside the arguments for and against user pays education systems. Education costs big money and someone has to pay for it. It's time to start saving the next generation of parents from the fear of having to meet the annual back-to-school budget, or worse still, the ever-increasing tertiary fees that are tying this generation of students to a lifetime of debt.