How to have a realistic discussion about Student Debt...my top tips.

When our young adults select their tertiary course, most know that their studies will incur some debt and that the fees-free year is available for most of our high school leavers.

But do they REALLY understand what a student loan means for their future?

I've seen a variety of approaches to managing debt from tertiary students - from the student doing a 4-year degree who wanted to graduate with no debt, so lived pretty much on canned beans for the entire time and avoided most social events because of the cost. The other extreme was a student adding about $300 a week in study-related costs to their student loan, to spend on frivolous spending and with no consideration of the total debt being accumulated.

There have been media articles in New Zealand about students with astronomical student debt - I hope that our young adults who think in binary terms (debt is either good or bad) don't get put off tertiary study based on these extreme stories.

The average student debt in NZ is about $22K but a typical 3-year degree (with all papers passed) incurs a debt of about $30K.

Education is the key to success but the form of education needs to be personalised for each student - not everyone has to go to University, but unfortunately schools promote it as the 'pinnacle' option as it makes the schools look good for the next intake of students and saves the school from having to undertake modern, realistic and specific career planning for each student.

I encourage you - parents - to have an honest discussion of the consequences of tertiary studies from a holistic (whole-person) approach - don't just consider the qualification, but the costs associated with it.

Here's some points to keep in mind:

1. Everyone's risk comfort is different - in terms of debt, some students can cope with going to tertiary studies with little money in their pocket and either being frugal or accepting that they have to work every semester break. Assess what your child's comfort level with debt is - does it freak them out or are they realistic in understanding what it means?

2. Think of the possible career paths that their studies could take them on - only about 60% of students finish their tertiary qualification in the standard timeframe. This suggests many students fail some subjects within their tertiary journey and have to repeat them, or change courses - this adds to the cost of the qualification. Consider the impact of this on their potential debt levels.

3. Consider ALL the costs associated with their study plans - their cost of living, how they will fund their hobbies/holidays (or maybe have to forgo excessive holidays?), transport costs, materials/computer costs, etc. Do they have a plan to cover these and feel they can cope with this without getting stressed out?

4. Assess their potential graduate income versus the level of debt they will graduate with - how long will this take to pay off etc. If there are no jobs available in their chosen field and they end up having to work in the hospitality sector at minimum wage until an opening appears, how will they feel about that? Is there another (less expensive) way they can step into that industry without a tertiary qualification?

5. Remember that most parents didn't have these student debt issues when they went to University, so try and imagine what it will be like for this next generation of graduates - with homes being priced at about 16X the average salary (compared with 4X for their parents as graduates) this generation is likely to face greater struggles in finding homes etc, so an assessment of the relevance of incurring a student debt is valuable.

6. Encourage your child to give an honest assessment of their spending habits - could they support or sabotage their life if not corrected now? My career search questionnaire assesses a student's risk level, so I use the results to open a discussion about their attitude towards money and their spending habits. One high school student I worked with admitted that she NEVER bought clothes in NZ - she loved some French designer brands and shipped them to NZ - and through our discussion, her mother acknowledged that her encouragement (and enabling) of this had created unrealistic expectations of a future lifestyle!

And finally, my TOP TIP for parents - do NOT pay your child's study fees upfront.

Even if you can easily afford it, don't.

Why? Your young adult needs to see the value of their studies and recognise the strategic cost of the decision they have made. And they need to know that there is a cost to failing a subject or quitting - if you've paid the fees upfront, where are the consequences for them? You've also got to have a discussion about whether you will pay for extra tertiary years, repeated subjects, living costs etc.

Telling them: "Pass your degree and I will pay off your student loan" isn't a motivator (again, it's giving a reward before their effort) - they will think that if they fail or need to add extra years onto their degree, you will still pay, so it opens up the potential for conflict and disappointment. They are now young adults, and the reward for completing their qualification needs to come from within them (their pride, sense of achievement, ownership of outcomes etc), not first and foremost from their parents.

Please, be brave enough to have the conversation (a two-way discussion, not a lecture) - it might be uncomfortable, but your child will thank you for it (maybe not now, but later!). Or, use me as an objective professional to work with you and your child in exploring career options and in sparking a discussion of student debt.

I'm Tracey Beard, a Career Expert and Coach - I love working with young adults aged 16-25 across New Zealand, as they explore their study and career options. You can email me at tracey@careermatters.co.nz or message me on Facebook @careermattersnz.