Student Loans – What you should know
Student loans work like this: A student and a parent (with an income) apply for a loan to the student, where the parent is required to pay the interest portion of the loan on a month-to-month basis while the student is studying. The capital amount sits in the student’s name, and the student is required to repay the loan through monthly installments upon graduating. The loan issuer (a bank, usually) ordinarily allows the student 3-6 months after graduating before they are required to start making repayments, and this term can sometimes be extended if you bring flowers for your banker. The idea with this is to give the student a fair opportunity to find a job after graduating. If, however, the free pass term expires, the parent (or whoever else stood surety for the loan) will be required to cover the repayments.
Are they good or are they bad?
It’s difficult to say whether funding your studies through a student loan is a good or bad idea, because it largely depends on the circumstances.
The bottom line: If not taking the loan would mean not studying, take the loan! Otherwise avoid it wherever possible.
It’s never a good idea to start life off with debt, but if you can get a leg up by doing so (ie: you gain a tertiary education), then it probably is a good idea. Just make sure you consider everything below.
Things to consider
1. Interest on student loans is not zero-rated! There is a common misconception that student loans bear no interest, or very little. The complete opposite is true – there is a huge amount of interest on student loans, comparable to any other household debt.
2. If you study away from home, your bill over a 4 year degree is likely to come to around R400,000. Repayments on that amount of student debt fall around the R12,500 pm mark – that is the amount you would be required to pay the bank every month after graduating. That might not sound too bad, but hear this: The loan issuer will not even allow you to make the repayments unless they can see you are earning more than enough money to both pay back the loan and live reasonably well. Otherwise they will simply decline, and make the parent who stood surety pay the loan. This is all good and well, but if your uncle or family friend or someone is the one being defaulted to make the repayments, it could get awkward! That means you’d have to find a job straight out of university paying R20,000 pm or more, which is a tall task for new grads in the 21st century.
3. The money from the student loans gets deposited straight into your bank account, and you can use it as you please. Please, don’t spend it on other stuff! Students often pay their tuition fees up front with student loan money, and when they see they have R15,000 left over, they spend it at the local bar and getting concert tickets… Don’t do it!
What you need to prepare
When applying for a student loan you’ll need:
- Your and your parent’s green, bar-coded ID book.
- Your parent’s proof of income (latest payslip).
- Proof of address of your parent.
- Proof of enrollment at a qualified tertiary institution.
When you go to the bank, you’ll simply hand over all the documentation, fill in some forms (make sure you know the full names and level of your degree), and you’ll have to give them a number as to how much money you need. The amount they give you will of course be dependent on the parent’s credit history and income bracket. A piece of advice here is when they ask you for estimates of your expenses, just say very, very low numbers – the algorithms won’t pick up on the fact that it’s impossible for a family of four to survive on R200 of food a month.
Only ask for the amount you need, no more! Don’t get stuck in a situation with too much debt after graduating.
It’ll take 20 minutes, and they’ll approve or decline you on the spot. 48 hours later you should have the money in your account. Just make sure you check on your loan issuer’s specific documentation requirements, as this can be a real stickler.
A few more things
The biggest and best student loan providers include First National Bank, Standard Bank, Nedbank, Absa Bank, Eduloan and the government’s National Student Financial Aid Scheme (NSFAS). We suggest taking a look at Eduloan and FNB, as they both are really jacked up with their technology which makes things much easier. NSFAS is the biggest loan issuer in SA, and they’ll help you through every step of the process too, which is helpful. For anyone with very little household income, the NSFAS is the best place to turn to fund your studies, as they are willing to work with you even if you don’t have a parent with an income to stand surety for your loan.
Also don’t forget bursaries and scholarships, which you can find at List of Bursaries. There is lots of money available to smart youngsters with ambition and the will to prove their worth.
Choose the Correct Loan Issuer
If you decide you do want to take a student loan you need to consider which issuer is best for you. Important: When browsing the different loan issuers, try to think ahead!
Here’s a breakdown of what each of the student loan providers entail:
Eduloan has the following student loan options for:
- Study loans (school and tuition fees, registration fees, exam and outstanding fees)
- Study tools (textbooks, technology, study equipment)
- Accommodation (covered during studies)
- Fixed monthly repayments
- You need four documents to apply and will receive a response in 48-72 hours.
- No deposits
- The study loan is paid directly to institution
- No limits
- Anyone can apply on your behalf (need to be fully employed and meet criteria)
FYI: Interest rates and repayments will vary according to the institution and the applicant’s profile.
For more information go here or phone 0860 55 55 44
What they cover?
- Tuition fees
- Campus Accommodation
- Personalised interest rate
- Access to loans from R4,000 to R80,000*
- While you study students only pay interest on your loan and can pay the rest after the student has graduated.
FYI: A new application is required each year you start studying.
For more information go here or phone 0861 40 40 40
If you are a full-time student, you will also get the Standard Bank transaction account that best suits your needs when your Student Loan is approved.
What they cover?
You can use the money from your Student Loan to pay for your tuition fees and accommodation (if you are a full-time student not living at home).
- Tuition and accommodation will be paid directly to the institution and place of residence whilst funds for books will be transferred to the transactional account.
- Student Loans are granted for a specific year of study and you will have to reapply for each year of registration.
- There is a maximum amount granted for each year of study.
- A once off initiation fee and monthly service fee will be charged on your student loan.
For more information go here or phone 0860 123 000
What they cover?
- SETA and SAQA courses
- accommodation and equipment
- Earn a monthly income of minimum R3000 per month
- Approved based on their affordability and risk
- Pay the prime interest rate on their study loans
- Customers are offered 15% discount on study equipment when they apply for a study loan
- The study loan forms part of the Student Package, which includes a student credit card and a cheque account
For more information go here or phone 0860 100 372
NSFAS is the biggest loan issuer in SA, and they’ll help you through every step of the process too, which is helpful. For anyone with very little household income, the NSFAS is the best place to turn to fund your studies, as they are willing to work with you even if you don’t have a parent with an income to stand surety for your loan.
For more information go here or contact them via phone and email below:
Tel No: 0860 067 327
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