Dreams Deferred

With the costs of university education in South Africa on a sharp incline, reaching an anticipated R95,700 annually by 2030, and soaring to R177,200 by 2038, planning for your child’s tertiary education has never been more critical. However, navigating this financial landscape doesn’t have to be daunting.

By steering clear of common mistakes and adopting a strategic approach, you can ensure your child’s educational journey is both enriching and financially sustainable. Here’s how to do it right:

“An investment in knowledge pays the best interest.” – Benjamin Franklin

How Much Does It (Really) Cost?

The pursuit of tertiary education is not just a financial decision; it’s an investment in your child’s future dreams and aspirations. That said, it’s essential to weigh the costs against the potential return on investment (ROI).

A practical guideline is to limit borrowing to no more than what your child is likely to earn in their first year after graduation. For instance, if your child is aiming to enter the teaching profession, with an average starting salary of around R258,000 in South Africa, your total borrowing should align with this figure.

Also important to consider is that the cost of a tertiary education goes way beyond just paying the fees. There’s food, boarding and social costs… just to name a few. The tertiary experience is not just about lectures.

For a tertiary institution to be a strong fit academically, socially, and environmentally, you and your child should consider and compare what the institution has to offer. Where will they stay, what clubs will they join, what activities will they participate in, do they need transportation money, what will they eat, how much do textbooks cost, what equipment will they need…and I could go on.  

So, look at your education savings, how much you’ll need to contributions from your income, and taking on a reasonable amount of debt against the full net price of attending that institution. Do you have enough or will you and your child need to borrow excessively to cover the tertiary costs.

In turn, this might force the student to drop out of tertiary or transfer to a less-expensive school when the financial realities set in. Dropping-out is a serious problem, one that parents should consider the true cost thereof. Failure by a student to complete their degree means that they have largely wasted a period of time, varying from one semester to two years or more.

The impact of dropping out can damage the student economically and psychological, making the tertiary experience one that they regret for years to come.

If we couple this with excessive borrowing, the student is left in debt for years, with fewer or less favourable job prospects, thus delaying certain life-cycle events—possibly, even until their own children enrol in tertiary—and will pay more interest over the life of the loan.

So, you’ll want to carefully review your child’s financial needs before they enter tertiary and each subsequent year that they’re enrolled.

“Learning is not attained by chance; it must be sought for with ardour and diligence.”– Abigail Adams 

Who Can Help Me?

A tertiary education, while a significant investment, doesn’t have to break the bank if you know where to look for funding:

Bursaries and Scholarships

Securing a bursary or scholarship can be a game-changer for students embarking on their tertiary education journey in South Africa. These financial aids not only alleviate the burden of university fees but also open doors to numerous educational opportunities without the worry of repaying a loan.

Understanding the nuances between bursaries and scholarships, and how to access them, is crucial for prospective students and their families.

Bursaries are typically offered by private sector companies, government entities, or educational institutions and are aimed at providing financial support to students who meet specific criteria. These criteria can range from academic excellence and financial need to specific fields of study that align with the organization’s interests or workforce needs.

A distinctive feature of bursaries is the often-included work-back agreement, requiring recipients to commit to working for the sponsoring organization for a period equivalent to the duration of the bursary upon graduation.

This arrangement not only covers the cost of tuition but also potentially provides a clear career path post-graduation. However, it’s essential for applicants to thoroughly understand the terms and conditions of these bursaries, as the commitment to work for a specific employer after graduation could limit immediate career flexibility.

Scholarships, on the other hand, are primarily merit-based or need-based awards that do not typically require repayment or post-graduation employment commitments. These financial awards are designed to recognize academic achievement, leadership qualities, community involvement, or special talents.

Offered by various foundations, trusts, and educational institutions, scholarships can provide significant financial relief, covering tuition, books, and sometimes even living expenses.

The competitive nature of scholarships means that students need to showcase their best qualities and achievements. Preparing a compelling application, highlighting academic records, extracurricular activities, and personal essays, is key to standing out.

For both bursaries and scholarships, the application process can be rigorous. Students are required to submit detailed applications, including academic transcripts, financial information, personal statements, and sometimes letters of recommendation.

Staying organized and meeting all application deadlines is crucial. Students should also explore multiple opportunities and apply for several bursaries and scholarships to increase their chances of receiving financial support.

Student Loans

Securing funds for tertiary education often leads parents and students down the path of student loans, a critical component of education financing. In South Africa, both major banks and independent financial institutions offer student loans, designed to bridge the gap between savings and the actual cost of education. Understanding the nuances of these loans can significantly impact both the student’s and the guarantor’s financial health.

To qualify for a student loan, proof of university registration is a must. However, the financial responsibility typically falls on a parent, guardian, or a financially stable relative, who must co-sign the loan. This co-signing arrangement means that the guarantor agrees to bear the loan’s repayment should the student fail to do so, underlining the importance of a thorough evaluation of the loan terms.

The terms of student loans can vary widely, with differences in interest rates, repayment schedules, and the period during which repayment must begin. Most student loans offer a grace period, allowing the student to focus on their studies without the immediate pressure of repayments. However, interest often accrues during this period, adding to the total amount that will need to be repaid.

A key aspect to consider is the impact on the guarantor’s creditworthiness. Co-signing a student loan appears on credit reports, affecting the guarantor’s ability to secure future loans for themselves. This could have implications for getting mortgages or financing major purchases. If the student encounters difficulties in making timely payments, it could negatively affect both the student’s and the guarantor’s credit scores.

It’s essential for families to explore various loan providers, comparing interest rates, repayment terms, and the flexibility offered in the event of financial hardship. Some institutions might offer more favourable conditions, such as lower interest rates for students who excel academically or flexible repayment options for graduates who enter public service.

While student loans are a valuable resource for funding tertiary education, they come with significant financial implications. Families should approach borrowing with caution, considering not just the immediate need for funding but also the long-term impact on their financial stability.

Planning, research, and careful consideration of all available options are key to making informed decisions that will support the student’s educational journey without compromising financial well-being.

“Education is not preparation for life; education is life itself.” –John Dewey

You Need 5 Years Working Experience

For many students, working while pursuing a tertiary education is not just a financial necessity but also a strategic decision that can offer numerous advantages beyond monetary gain. Engaging in part-time work, internships, or freelance projects during university years can significantly enhance a student’s professional development and practical experience, making them more attractive to future employers.

  • Earning and Learning: One of the most immediate benefits of working while studying is the ability to earn money to help cover tuition, books, living expenses, and other costs associated with university life. This financial independence can reduce the need for loans, potentially lessening the debt burden upon graduation.
  • Skill Development: Part-time jobs and internships related to a student’s field of study can provide invaluable real-world experience, bridging the gap between theoretical knowledge and practical application. These opportunities allow students to develop professional skills, such as time management, communication, teamwork, and problem-solving, which are highly valued in the workforce.
  • Networking Opportunities: Working while studying opens numerous networking opportunities, allowing students to establish professional relationships and connections within their chosen industry. These connections can be crucial for securing full-time employment after graduation, as they offer insights into job openings, recommendations, and professional mentorship.
  • Enhancing Employability: Employers often look for candidates with work experience, even for entry-level positions. Students who work during their studies can demonstrate a strong work ethic, commitment, and the ability to balance multiple responsibilities. This experience can significantly enhance a student’s resume, setting them apart from other graduates who may not have worked during their studies.

While the benefits are numerous, working while studying requires careful consideration and balance. Students must manage their time effectively to ensure that work commitments do not negatively impact their academic performance. It’s important to find flexible employment that accommodates academic schedules and allows for exam preparation and coursework.

Universities often provide resources to help students find part-time work, including job fairs, career counselling, and online job boards tailored to student needs. Freelancing platforms can also offer flexible work opportunities that students can tailor to their schedules.

Continuous Financial Planning

Effective financial planning for university is an ongoing process. At Luthuli Capital, were able and ready to assist you in creating and managing this process. Regularly reviewing and adjusting your strategy based on savings, income, and expenses is essential to ensure your child can complete their education without undue financial stress or the need to withdraw prematurely.

By avoiding these common financial mistakes and carefully considering all available options, you can make your child’s dream of tertiary education a reality without compromising their financial future or yours. With thoughtful planning and informed decision-making, navigating the costs of university education can be a manageable and rewarding journey.

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