It is estimated that Australia’s Higher Education Loan Payment (HELP) program annually makes student loans totalling more than $6 billion.1
So unless students (or often their parents or grandparents) can afford to pay their course fees upfront, they face the reality of having little or no choice, but to take on potentially serious levels of student debt.
Forward thinking parents and grandparents can use Insurance Bonds to build financial provisioning earmarked to reduce or payout the growing student debt burden on their children and grandchildren. Alleviating student debt can be invaluable to their early adult life opening the way to the important things of bygone times, such as buying a home, starting a family, overseas travel or even starting a business.
If the Insurance Bond is not used (or fully exhausted) for paying course fees directly or discharging a student loan, it can be used by your child or grandchild over its Vested Stage for other worthwhile starting out in life purposes.
Case Study2
After successfully completing a Bachelor of Environments degree at RMIT (and paying for her own course fees with the help of her parents), Kate now aged 23 has nearly finished a post-graduate law degree at Monash University.
So far Kate has funded her law degree by accumulating a HECS/HELP debt. By the time Kate turns 25 and is finished her course, she estimates her student loan from the Australian Government will be over $90,000.
Strategy and outcomes
Fortunately for Kate, her grandfather wisely decided to set up a $25,000 Insurance Bond for her 10th birthday, invested in Australian equities that were managed inside the Bond by a professional manager to vest on Kate’s 25th birthday.
The Bond achieves steady after fees and tax performance so, when Kate turns 25 and her Bond vests, it should have grown in value to around $90,000. This should be enough to pay out Kate’s HECS/HELP loan so she can start her career debt free.
Alternatively, Kate might use her Bond for other things, such as buying an apartment.
1. Andrew Norton, 2014 Doubtful debt: the rising cost of student loans, Grattan Institute (April 2014)
2. This case study is a hypothetical example and not meant to illustrate the circumstances of any particular individual. It is not based on actual or forecast investment returns for Investment Bonds. Past performance is not indicative of future performance.
Richard Atkinson
Head of IFA Product and Relationships
Austock Life Limited
t: 03 8601 2095
m: 0417 541 897
e: RAtkinson@austock.com
www.austock.com