How We (and Our Daughter) Plan to Pay for University Without a Student Loan
02 Nov, 2025
Well, the moment has arrived. The tiny five-year-old who started Primary School back in 2012 has just turned 18 and completed her final day of Year 13 at High School.
Just. Like. That!
I was warned that time would pass quickly, and it has.
I wish I could show you a before-and-after photo, but she has never wanted to show her face here on The Happy Saver, and I respect that. Here is a before-and-after illustration to give you the idea:
She has a few exams to get through, then she is done with school for good and can enjoy a few well-deserved weeks of R&R. Once the weather heats up, she will launch into full-time summer work for a local cherry packhouse.
What’s next?
Throughout 2025, a lot of thought has gone into her next steps post-school. All options have been considered, from finding a full-time job to getting an apprenticeship, travelling, or heading into further study.
Last year, I wrote this blog post How Our Daughter Will Pay Cash For University. It was a helpful precursor to today’s blog post.
To help her decide on her next steps, she spoke with her school career advisor and a professional career advisor. She had conversations with several people working in the professions she was interested in. The choice was made to either study at the University of Otago or the University of Canterbury. She was accepted into a Hall of Residence in both cities, but she earned a $5,000 Scholarship at Otago, so that sealed the deal. She also won a second scholarship from Central Lakes Trust for $2,500.
How much will it cost to study in 2026?
Going to university is expensive. Most of the cost is in the accommodation. She could have gone flatting, which may have been cheaper, but given she is leaving home for the first time, and moving to a different region, we were happy for her to use a Hall of Residence in her first year.
How will she/we pay for it all?
We have always explained to her that we will financially assist her through university, provided she also contributes. She has done that. It’s going to be a family effort to get her through her degree debt-free. At this stage, we are budgeting for three years, but it may extend beyond that. She is not entitled to a means-tested government student allowance, and we do not want her to take out any student loans. I’ll talk more about that shortly.
Throughout 2025, she has been more systematic in her university savings by easing up on her ETF investing and opening a separate university savings bank account, where 50% of every dollar she earns is deposited. In addition to front-foot the bills due in 2026, Jonny and I have been adding about $80 per week to this account. As her school expenses stopped, we just re-routed this money to her university savings account.
Using this money, she will handle all necessary payments and, in this way, get used to what life actually costs.
Hall of Residence
Accommodation cost for her standard room: $21,470.
In addition, to secure her spot in a Hall, she paid a $1,020 ‘Student Placement and Activities Fee’ in October.
She is allowed to live at the Hall for up to 38 weeks, from 14 February 2026, up until 24 hours after her last exam in November 2026.
How will she pay?
There are three options to choose from to pay for the Hall of Residence:
Pay in full
Pay in four instalments
Pay half up front, plus a weekly payment
We chose Option 3:
Upfront payment - $10,994.00 (due 1 Feb 2026)
36 Weekly Payments of $291.00 (1 Feb 2026 - 28 Oct 2026)
Student Placement and Activities Fee $1,020 - Already paid
Her $5,000 University of Otago scholarship will be applied to the upfront payment, and Jonny and I will provide the remaining $5,997 and the ongoing $291 weekly payment. We will either cash flow this lump sum or sell a sliver of our Smart Total World ETF.
Course Fees
We are still finalising her papers, which will be a mix of Law, Psychology, and Criminology. At this stage, she is interested in a career in border or national security.
Based on 2025 prices, she estimates her fees will be ~$8,500*.
She will also pay a Student Services Fee of ~$1,152*.
* The university will confirm 2026 fee costs by December, and I do not doubt that they will be higher than the above.
Of course, Year One used to be fee-free, but the government suddenly deleted that option. In Year Three, she will have to pay her fees in full, and upon completing her studies, she will be reimbursed by the IRD, unless the rules change again.
Paying for University Course Fees
The ~$1,152 Student Services Fee must be paid in full at the start of study. She already has the money to pay for this from her university savings bank account.
Tuition fees are paid per paper, per semester, meaning her costs will be split across two semesters, except for any full-year paper, which must be paid in full at the start of the course. She will apply the $2,500 scholarship she received to her first semester fees and cover the remainder from her savings account.
By the time payments are due, we estimate she will have saved about $11,000 in cash, enough to cover all her fees for the year.
As mentioned, she moves 50% of each pay cheque into this account, and it will receive a significant boost from full-time work this summer. Jonny and I also deposit ~$80 each week, meaning she will save up enough.
Miscellaneous Costs
She has been budgeting with PocketSmith for some time, which has allowed her to easily estimate that she might need an additional $60 per week to cover costs beyond accommodation and food. We will see how this goes and how the temptations of city living impact her spending.
Jonny and I will continue to pay her phone bill, health/car insurance, travel to and from home, etc. These will be handed over to her to manage in time.
Paying Miscellaneous Costs using The 4% - 5% Rule
Since she earned her first dollar, she has invested 50% of it in an ETF. Since birth, we and then she have also contributed to KiwiSaver. Meaning that, now aged 18, she has $60,000 invested. Her KiwiSaver is in an InvestNow Foundation Series Total World Fund, and she has investments in a Smart US 500 ETF (which she no longer contributes to), and a Smart Total World Fund ETF (which she does contribute to), using Sharesies as her broker.
By mid-2025, sadly, it was time to stop the 50% investment rate for now. We knew she needed cash next year, so now, every dollar she earns is split three ways:
50% to her university savings bank account
20% to her Smart Total World Fund ETF Sharesies investment - The habit of investing a portion of income must continue.
30% for spending
We have gone back and forth on how to help her utilise her investments to her advantage for the next few years. The plan is to sell 5% of her US 500 ETF each year, rather than selling the entire lot to pay for the study. Why? Invested money makes money. I don’t want her to get in the habit of selling off all her investments to fund her life. I see adults do this all the time: they kill the goose that is laying the golden egg and have to start over. If I can school her up to only ever skim the cream off the top by selling 4% - 5% annually, then the remainder will continue to compound and grow, which in turn, can provide greater annual income.
In January, she can sell off 5% of her total investments. At its current value, 5% of $60,000 is $3,000. This will be her $60 weekly income to cover her miscellaneous costs. To manage this money, we will encourage her to put it in its own bank account and set up a weekly direct deposit into her eftpos account so she knows she has a fixed weekly income she can rely on.
Importantly, she will leave university debt-free, with KiwiSaver and an ETF investment she can build on, which could also provide her with a small source of income while she settles into a paid career.
She needs to get a job.
She has worked a small part-time job for many years. Plus, she has picked up extra income by pet-sitting in our neighbourhood, something she enjoys. Over the summer, she has always worked in the cherry industry here in Central Otago.
Once she settles into her new university routine, we want her to find work during the academic year. It doesn’t have to be a lot, but even earning another $50-$100 a week helps. And having spoken to many tertiary students, if you manage your time well, for most courses of study, working is easily achievable, and it gives you work experience too. The hardest part will be finding work, given that thousands of students have the same idea. But we have a few ideas and will support her to scope them out. If you have a Dunedin-based or an online opportunity, please let me know!
Study, work AND invest.
Yes, we want her to continue to invest while she studies. Why? Because regular investing has become a habit that needs to continue throughout life. I don’t want her to start and stop constantly. Just as you budget to pay rent and food, you need to budget to invest. Now that she is 18, I’ve handed her complete control of her Sharesies account, and until she finds work of her own, we intend to deposit just $10 a week, so that she can maintain her weekly investing habit.
Taking it one year at a time.
As we have always done, we will take life as it comes. As her parents, we are making it up as we go along, and for now, this parent/child financial partnership is fit for purpose.
Yes, we will sever the financial ties at some point, but we don’t think it's fair to her to do so at a time when she has limited earning potential to cover the $30,000+ needed to study and live. She will pull her weight, and we will make up the difference, given that we have spent a decade ensuring we are financially stable enough to do so.
Now, if you think she is delighted by all of this and has been actively strategising alongside me, think again. I’ve been blessed with a daughter who doesn’t have much interest in the details of money but understands the broader concept of managing money simply. Far from a weakness, this has become a strength. Because she doesn’t stress or overanalyse the small stuff, I explain the logical plan above, she gives her input, and it's done. She is the perfect investor and manager of her money. Devise a simple plan, and get on with life.
Despite her hands-off attitude, because I’ve literally made her invest a percentage of every dollar earned, set up bank accounts and monitor her net worth, to her credit, she has done what I asked. But she has no plans to ‘borrow‘ money from the government to make money; she has side-stepped that process by just investing her own money. Over the years, she has come to realise that it works. She has an excellent foundation to build her own financial future.
And now for the but…
Because I know that you are wondering…
But why doesn’t she just take out an interest-free student loan?
Not on my watch!
As we help our daughter plan her future, I keep drawing on the experiences of the many women and men I’ve spoken to over the years about their financial journeys. One theme that keeps coming up is student loans, as they loom large for too many.
Too often, young people are steered into debt by well-meaning parents, teachers, and career advisors. Banks tempt them with easy credit, and everyone assumes that borrowing is just a normal part of growing up. But here’s the thing: it’s the student who takes on the debt, and it’s the student who carries it for years (often decades) after those well-meaning adults have moved on.
Only later, when those same students become adults and parents themselves, do they realise that the people who encouraged them to borrow were often not in a great financial position themselves. They were repeating what they’d been told, not what actually worked.
A financial motto I live by is: Don’t take financial advice from people who have no money.
I’ve met far too many 20, 30, 40, and even 50-year-olds still dragging around student loan balances from decisions made at 18. I regularly meet parents whose children are studying, and they both have student loans! Why does it hang around so long? Because life happens:
Lower-than-expected incomes mean smaller repayments.
Time out for children means payments stop.
Working part-time or caring for whānau limits repayments.
Relationships end, halving wealth.
Some move overseas and ignore their growing balance.
Others never use the degree at all.
Priorities shift: Travel, mortgages, kids…
Worryingly, most new students do not realise that once your income passes a small threshold, 12% of every paycheque will go to your student loan. Nor are they aware that student loans once carried an interest rate of almost 8%, and that nothing is stopping the government from reintroducing interest.
As my daughter is learning, adult life only gets more complicated and expensive after university.
Now, interest-free student loans are a great leveller, as they make education accessible for people who couldn’t otherwise afford it. That’s a good thing. But they were never meant to be an investment hack for those who could pay their fees upfront. I’ve run the numbers on “investing your student loan,” and for all the mental gymnastics, it’s simply not worth it. I’ve met too many people in their 40s and 50s still drip-feeding their loan repayments, proud of their clever strategy, while paying accountants to help them do it. Yawn. Just pay it off and put your energy into something more productive.
Best intentions rarely play out as planned. The student who borrows to the max and keeps their “loan money” in a savings account loses to inflation. The one who invests it often doesn’t know what they’re doing and ends up worse off. And the one who intends to pay it back when they graduate finds that life, travel, moving overseas, and relationships get in the way. When you finish university, you need money. And the cash earmarked for loan repayment ends up being spent in a bar in Ireland instead. YOLO.
And then some borrow, knowing they’ll never repay if they can avoid it, by moving offshore and letting interest accrue while they build wealth elsewhere. I think that’s morally wrong. You borrowed the money; you benefited from the education. Be an adult and pay it back.
At the end of the day, interest-free student loans create the illusion that education is free. It’s not. The bill just arrives later, often when life has already become expensive and complicated. For most, it’s far better to study affordably, borrow minimally, and pay it back as soon as you can because financial freedom feels far better than carrying a student loan into middle age.
I’ve come to realise that the whole “just borrow the money, it’s interest-free” line is way too simplistic, and honestly, it trips up far too many graduates later on. My job as a parent is to help our daughter see the bigger picture, to guide her away from harm where I can. For us, avoiding unnecessary student debt is one of the easier ones to sidestep.
We’re working together to get her educated in something useful that she enjoys, to pay for it as we go, and to set her up for an exciting life on the other side. A life where she’s not spending years paying off something she’s already moved on from. When she finishes her studies, I want her looking forward into the job market, into the world, not backwards at a debt that’s still nipping at her heels.
