Financing your child’s education

All parents dream of providing a good, quality education for their children but, for many, financial constraints render their dreams unrealistic. Most parents are not aware that there are many affordable options available when it comes to financing children’s education.

The Fundisa Fund
The Fundisa Fund is a bonus-based initiative whereby parents or investors are encouraged to save for a child’s education through a unique bonus feature that allows an investor to receive an additional 25% on his or her investment amount. The Fundisa Fund aims to help parents provide their children with a high-quality accredited college or university qualification. There is no limit on the number of investors who may save on behalf of a single learner, although this educational savings account allows for a maximum bonus of R600 a child annually, which is added to your savings, regardless of the number of investors.
This initiative has been made possible through a joint venture between government and various unit trust companies. A Fundisa account can be opened at any Absa, Nedbank or Standard Bank branch by any South African citizen or permanent resident, provided the learner is also South African. The investor need not be related to the learner.

Standard Bank student loans
A Standard Bank student loan is another way of funding tertiary education. These loans cover much of the cost of studying, including tuition fees, books, equipment and accommodation. Financial aid of this sort is provided based on academic performance (matriculation or yearly tertiary results) depending on what year of study the loan is being applied for. Loans are reapplied for with each additional semester or year of study. If a student fails to perform academically he or she will not qualify for a loan the following year.
Loans are repaid only once the student has completed his or her studies. But students are required to pay the minimal monthly interest on the loan while studying so that the actual loan amount remains the same when it is repaid. The interest percentage varies, depending on the amount of the loan. To qualify for a Standard Bank student loan you need to be a registered student at an accredited tertiary institution studying towards an undergrad or post-graduate degree, diploma or certificate. In addition to this, the student needs to have bank-approved surety. Loans can be applied for at any Standard Bank branch.

NSFAS
The National Student Financial Aid Scheme (NSFAS) is an organisation aimed at providing financial assistance to fund higher and further education to deserving South African citizens. This initiative is made possible through funds that are allocated to the NSFAS by the state and other donors. A system called the “means test” is used, which assesses the need within the household of a prospective student who applies for financial aid and determines how much funding should be awarded to the successful student.
According to Bonny Feldman, communications and development officer at NSFAS, “up to 40% of a NSFAS loan may be converted into a non-repayable bursary, depending on the student’s pass rate, as an incentive to get students to work hard and get through their courses”.
Students are obliged to repay a loan once they are earning at least R30 000 a year. Monthly repayment amounts are based on the salary amount and vary between 3% and 8% of the salary. The interest charged on loans is subsidised and, therefore, considerably less than the commercial rate charged by banks.
South African citizens studying for a first undergraduate degree at a public university or university of technology and who are financially needy qualify for a loan. They must have academic potential, which equates to being accepted to study at the institution. Loans can be applied for at the university’s financial aid office once the student has been accepted by the institution.

Old Mutual educational policies
Another option parents could consider is the various Old Mutual educational policies on offer. These include:

  • Unit trusts: A unit trust is an option to consider for parents who want to begin saving for their child’s education from a young age. This medium- to long-term stock market investment enables you to either invest on a monthly basis or once-off with a lump sum for any period of time. The more time you have, the more aggressively you can structure your investment portfolio.
  • Max investment: A max investment offers diverse tax options targeted at parents who are looking for tax efficiency. In addition to this, it offers different payment options that could either be fixed or flexible, depending on specific needs.
  • The education plan: An Old Mutual education plan is a 10-year, long-term education savings plan that is an affordable solution. The minimum investment period for an investment of this sort is 10 years, although there is limited access to funds after five years.
  • To apply for an Old Mutual education policy you should contact your financial adviser or you could visit www.oldmutual.co.za to get in touch with an Old Mutual personal financial adviser.

    Metropolitan
    The Metropolitan future builder education plan is yet another way of investing in your child’s education. With an education policy, a parent or family member invests in a monthly premium over a certain period of time, allowing the policy to grow in value.
    After five years you will have access to one cash withdrawal each year up to a maximum of 30% of the total fund without paying any penalties, allowing you to settle primary and secondary education costs as your child progresses to the next level of education.
    At the end of your investment term you receive the balance of your investment to pay for your child’s tertiary education fees. The longer you save, the lower the premiums are to meet your financial goal.
    Customers are also rewarded for keeping the policy in force with a loyalty bonus, leaving them with more money at the end of the investment term. You don’t pay any tax on your withdrawals or your maturity pay-out.

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