It’s another year and another back-to-school costs report. This one from the Irish League of Credit Unions! And not unlike previous iterations of this report, we learn that education in Ireland is not without cost.
Whether it is children returning to primary or secondary school or even college, the costs run into thousands and much more if college-bound students are concerned!
All this impacts families up and down the country where careful financial planning is an absolute must when it comes to education costs.
To begin with, even for parents of primary school children, according to the ICLU report, the cost of getting them school-ready can be in the region of €1,100 per year and per student. This increases to about €1,500 for secondary school. But the greatest cost of all is for those college-bound students where costs can range from between €6,500 and almost €12,000 per year!
Planning is the first step
For parents that seek to avoid using debt to fund the back-to-school costs, long-term planning is an absolute must. And it will not be sufficient to just plan for cost at a particular school level. For example, it will be necessary to factor in the long-term cost of an education in totality. So, if there is one child, the cost of educating that child multiplied by the total number of years they will be in primary / secondary school or college is the real number parents need to plan for. Depending on the college situation, on whether they commute to college from home or live away from home, the total cost of education, including all costs can be in excess of €50,000 per child (and far more if they live away from home where accommodation costs kick in).
While some of the primary and secondary school costs can be funded from monthly household budgets, this many not be an option for all families.
Option for paying!
While the cost of paying for a child’s education is not cheap, there are many ways to cover the cost. The primary options are:
- Save the full amount
- Borrow to cover some or all the cost
- Use available scholarships, grants and bursaries
This option requires time. And depending on how the money is saved, including being left on deposit earning little or nothing by way of earned interest or invested, this may require a parent taking action before the child is actually born. To protect against the corrosive impact of inflation on the value of money, some investing will be required.
From a simple savings perspective, few banks or credit unions pay little more than a fraction above Zero but for anyone exploring this option, they should check out the Competition & Consumer Protection Commission website (www.ccpc.ie) for all available rates.
When it comes to investing, parents will need to take some investment risk. There are many investing options available. One of those is managed funds or also, exchange traded funds (ETF’s). Depending on the makeup of such funds, annual returns of 4% – 10% are possible and taxes will be payable at between 33% (CGT) to 41% (exit tax).
This is another option available to parents. Credit unions and banks can be very competitive. Interest rates are available on lender websites or even on the CCPC website for anyone looking to compare the best value deals. Here, it is important to keep in mind that for credit union loans, membership is required. Applicants will need to have a good credit record and demonstrate repayment capacity. The final consideration is the cost of credit, this is a function of the Annual Percentage Rate and loan term; the longer the term, the greater the cost of interest to the borrower.
Scholarships, grants and bursaries
The other area that may not always get fully considered when it comes to paying for education, especially third level education is having someone else pay. This is where scholarships come to the fore and here in Ireland, the idea is far from new. Ever since the 1950’s, Irish athletes have been receiving athletic scholarships to the US. In more recent years, Irish colleges and universities have begin to offer a limited number of scholarships also. And parents should keep in mind that scholarships can be available for any number of reasons; academic, sports, music, science and much more.
Additionally, there are many grants available for a wide number of reasons, including SUSI grants. And finally, many credit unions offer so-called ‘bursaries’ which are also a form of grant support for qualifying members or the children of members.
A few things to keep in mind with scholarships, grants and bursaries is that while they can help reduce the financial burden on parents, they may not eliminate the costs entirely. Using the US example, children that may earn a sports scholarship will still need to pass academic criteria set by the individual college. Plus, there can be myriad other costs, including travel, medical insurance and so on that may not always be covered by the awarding university. That said, unlike loans, such options do not need to be repaid and therefore reduce the financial burden on parents significantly.
For some students, getting a part-time job may also be part of the funding mix. While keeping down a job can alleviate some of the financial pressures that comes with third level education, especially when living away from home, it can risk class participation on occasion. It is also important that students remain aware of any tax liabilities they may have as a result of employment income.
There is no one-solution-fits-all when it comes to paying the full cost of education. However, what is certain is that long-term planning is absolutely required, especially if one is planning to save the full cost. Knowledge is also required, especially on investment decisions and, on grants and scholarships. With sufficient time, adequate savings and careful planning, most parents and students should be able to manage the full cost of education with relatively minimal disruption.