Q My  daughter has just commenced University as a Commonwealth Supported Student.  We intend to support her financially whilst she is studying.  Could you please explain the pros and cons of paying her Tuition fees upfront?  We want to strike a right balance between providing financial support and encouraging independence.  Any other tips on incentivising study?

A The cost of your daughter’s Tertiary studies will depend upon the University she is attending and the course she is enrolled in.

As your daughter is a Commonwealth Supported Student the tuition costs are subsidised by the Federal Government. Assuming she is not on a Tertiary Scholarship, she is obliged to make a Student contribution to her tuition costs.   If you or she elect to pay her Student contribution upfront, she will receive a 10% discount on the fees.  To receive the discount, the payment must be made before either the administration date or the Census date whichever is earlier.  The dates will vary between institutions but is usually around 31 March.  Please check with the University for the applicable cut off dates.

Alternatively you can apply for a HELP (Higher Education Loan Program) loan to fund the cost. HELP loans are available to both Full Fee paying students and Commonwealth Supported Students.  To be eligible to receive a HELP Loan your daughter must be an Australian Citizen or Permanent Resident  and studying at least 1 unit of study in Australia.  The terms and costs of a HELP loan for a Full fee paying student differ from a Commonwealth Supported Student.

Your daughter must also apply for a HELP loan before either the administration date or the Census date whichever is earlier or face withdrawal from the course. Again please check with the University for applicable cut off dates.

A HELP loan accrues no interest but is indexed to the CPI at 1 June each year. Loan debts are not indexed until a debt has been in existence for 11 months.

You can make voluntary payments at any time.  Payments of $500 or more receive a BONUS 5% of the payment amount credited against the loan balance.

The loan debt is repaid via the taxation system when your daughter commences employment at an income of greater than $53,345.  The repayment rate percentage will vary from 4% at $53,345 progressively rising to 8% when income is greater than $99,070.

The advantage of paying the Student contribution upfront is the 10% discount. The advantage of HELP is that it is the cheapest loan your child will ever get; no interest and indexed only to inflation.

Ultimately how much financial support you provide your daughter is up to you.  Some parents pay the tuition costs upfront but seek repayment from the student if they fail a unit. My advice would be align the support you provide your daughter to the behaviour you wish to encourage.  For example, if your daughter’s results suffer as a result of having to undertake paid work to fund genuine living expenses, (NOT “lifestyle” wants!), consider funding those living expenses and rely on a HELP loan to fund the tuition costs.  If you wish to reward effort or results, repay the HELP loan on her behalf on a results basis and receive the 5% bonus .

For further information visit www.studyassist.gov.au

Follow Andrew on Twitter @AndrewHeavenFP. This article was originally published in The Australian