Morgan Stanley
  • Wealth Management
  • Apr 30, 2018

The Price of Knowledge

Planning for your child’s best financial future.

"Education is the passport to the future, for tomorrow belongs to those who prepare for it today."
- Malcom X

With the costs of higher education trending higher each year, paying for university has become a top-tier life expense, alongside other big-ticket goals like buying a home and planning for retirement.

Eligible Australian students can access a range of loan options to assist with their tertiary education. The decision to delay payments can, however, turn into an albatross around the necks of some new graduates.

The loans are seen as a low risk option because they are interest free and only require repayments to begin once graduates earn a certain pre-set amount. In reality, consumer indexation still grows any unpaid debt on a student loan, having an impact similar to that of a standard interest rate. Another point of concern should be the fact that the government can change repayment rates and structures at any time, creating a situation that newly graduates may not have bargained, nor budgeted for.

In some situations the loans can prevent young adults from gaining an early financial foothold in life.


Currently, eligible Australian students have access to the government’s HECS-HELP scheme – which helps pay for their student contribution amounts through a loan or upfront discounts. Students may also access a range of other loans, including FEE-HELP, which is designed to assist with tuition fees.

Australia’s outstanding HECS-HELP student loans now total more than $50 billion. Some students have borrowed excessively against the loan schemes and will never be able to repay their accumulated debt.

In 2017 changes were announced to the way repayments on student loans are structured, as part of the Australian Government’s Higher Education Reform Package. In line with the package, student fees are expected to increase by 1.8 % in 2018 and continue rising to a total of 7.5% by 2021. The changes will also see the compulsory repayment threshold for student loans lowered from $54,869 for the 2016-2017 financial year to $45,000 in 2018-2019.

From 1 July 2019 all HELP repayment thresholds will be indexed at Consumer Price Index (CPI) instead of average weekly earnings. The proposed new CPI indexed minimum threshold for 2019-2020 is $45,900. Repayment rates start out at 1% and increase incrementally as salary brackets rise.

Detailed information on the range of government loans available to students, including repayment rates and changes, can be found online at



"An investment in knowledge pays the best interest."
- Benjamin Franklin

Parents who don’t want their offspring to start out saddled by student debt are opting to pay their university fees up front. This also dodges the indexation costs of a student loan.

In light of sky-rocketing property prices, many parents also feel that cash earmarked for student loan repayments could be better spent on saving for a house deposit.

To help their adult children, parents may cut back on payments into their retirement plans, or gift a sum of money to their children, rather than waiting to leave them funds as part of a legacy.


For many students, living at home while studying may not be possible due to geographic limitations. The family home may be in a regional or isolated area, or the desired institution may be located inter-state or an unreasonable distance away from the parental residence.

Some young people regard living independently to be an important part of the university experience, while parents may see it as a way for their children to learn valuable life lessons and develop their independence. Parents left with an empty nest when their son or daughter decides to relocate may also find themselves enjoying a newfound sense of freedom, greater privacy and extra space at home.

For students living on campus, in a shared rental, or on their own in rental accommodation, there are plenty of costs to consider beyond student fees. These include rent or board; food and household items; internet connection; phone bills; amenities such as electricity, gas, heating; textbooks and supplies (depending on area of study – science degrees may require certain protective clothing and equipment, visual art students will need to purchase art materials); student union fees (these are compulsory at many tertiary institutions); health insurance (parents may wish to include them as a student on their own policies); transport (student passes and shuttle buses make this cheaper – but outside of study time expenses may be incurred); and recreation.

Parents planning to cover the entire cost of their child’s education will need to factor these expenses into a savings plan.


For information and advice on planning for your family’s financial future please contact your Morgan Stanley Financial Planner.