Most students/parents cannot afford to pay for their education. Some students/parents can finance their education, while some others need financial help. Student loans in South Africa enable students to live independently and ease the burden on their parents.
Although many universities offer scholarships to reduce the burden on both the student and the parent, not all students meet the requirements to apply. The alternative option students can consider is applying for a student loan. Depending on the country and university the student chooses, fees and funding can vary. As you read along, you’ll see more about student loans, types, requirements, etc.
What is a student loan?
A student loan simply means a type of loan designed to help students pay for their post-secondary education and the associated fees. And these fees include; tuition, books and supplies, and living expenses during their education.
How do student loans work in South Africa
A student and a parent (who has an income) apply for a loan, where the parent must pay the interest portion of the loan on a month-to-month basis while the student is studying. The student is responsible for repaying the capital amount through monthly installments after graduating.
The student loans are deposited directly into your bank account, and you can use them however you like. Don’t waste it on other things! In many cases, students pay their tuition fees with student loan money, and when they have R15,000 left over, they go to the local bar and buy concert tickets… Don’t do that!
Typically, the lender (a bank, usually) allows the student 3-6 months after graduation before they are required to start making repayments, and this can sometimes be extended if you bring flowers for your banker. This will give the student an equal opportunity to find employment after graduating. If the free pass term expires, the parent (or anyone else who stood surety for the loan) will be liable for the repayments.
What are the types of student loans?
Before applying for a student loan in South Africa, it is important to know and also understand the most suitable loan that fits your financial specifications. The following are the two main types of student loans;
- Subsidized loan
- Unsubsidized loan
1. Subsidized loans
They are loans meant for undergraduate students with financial challenges. They determine it when they subtract the student’s cost of attendance from his or her expected family contribution and other financial aid. Unlike other types of loans, subsidized loans do not accrue interest while the benefactor is in school at least half-time or during deferment periods.
2. Unsubsidized loans
These types of loans are for both graduates and undergraduates. Unlike subsidized loans, they do not base them on financial needs. They determine the eligibility for this kind of loan by the benefactor’s cost of attendance minus other financial aid.
Lastly, benefactors of unsubsidized loans handle the interest from the time they receive the loan until they pay it in full.
How to prepare for student loan applications
Below is a checklist for responsible borrowing:
- Calculate your financial obligations and how much you will need for each remaining year;
- Calculate the interest rate of your student loan using the calculator;
- By clicking on “view fees and additional info” below each product, you can learn if there are any extra fees or fixed bank charges;
- Calculate the total amount of money you will have to pay after you graduate;
- Compare different options and the available payment plans;
- Consider how much you may earn after graduating; and
- Decide if this is something you can afford.
What are the requirements for applying for a student loan in South Africa
Just like every other loan type, it requires applicants to possess a couple of documents to qualify. Some of these documents include;
- A copy of your parent’s green, bar-coded ID book (or ID card)
- Copy of your bar-coded ID book (or ID card)
- A copy of your parent’s proof of income (latest payslip)
- Proof of address of your parent
- Proof of enrolment at a qualified tertiary institution.
Some financial service providers might request some extra vital documents for student loans in South Africa
Some of these extra documents include:
- Your latest exam results.
- An invoice or statement for university fees, textbooks, and accommodation (for campus or university-accredited accommodation only).
- Letter of the necessity for any study-related equipment
- Marital status declaration.
Having all these documents intact increases your chance of getting your loan application approved.
How can I apply for a student loan
The application process for a student loan might differ depending on the financial provider you eventually decide to go with. The following steps are vital for you to apply to almost all financial service providers. These general steps include:
- Carefully studying, compare and weighing your options
- Choosing the most suitable financial provider that best suits your specification
- Research and background check. This involves studying the financial service provider’s requirements and terms/conditions.
- Readying all the required documents
- Carefully following the application process of the chosen financial provider as found out during your research.
What are the benefits of student loan
The major benefit of student loans is reducing the financial burden resting on the parent/student. Apart from fulfilling this benefit, a student loan has many advantages. See these advantages below;
1. College student loans are flexible
Unlike other types of loans, the terms and conditions of students loans are usually more manageable. The requirements for running a college career can be financially challenging. Financial service providers understand this and strive to make education loans easier to manage for students.
2. Student loans help build credit
For a lot of students, an educational loan is the first major financial transaction. Though getting a student loan may be a daunting prospect, it’s a perfect opportunity to build a solid credit history. Whether it is a private loan or a federal loan, a student loan is the beginning of many students’ financial history. By respecting the loan terms and not defaulting, students can lay the foundation for a good credit score. This would be very beneficial in the student’s later life.
3. Low-interest rates
Federal student loans offer all applicants a low and fixed interest rate. These rates do not fluctuate over the life span of the loan. They are the lowest rates possible for an educational loan. Private lenders on the other hand offer varying interest rates depending on the lender and the applicant. They measure the interest rate with private lenders according to the applicant’s credit score.
4. Low Fees on Student Loans
Unlike other forms of loan that come with a bundle of additional fees attached, they grant student loans with just a fixed interest rate alone. They tailor them in a way to soothe and ease the financial challenges of students.
How can i get a student loan in South Africa
Each of the loan providers listed on this page is a registered credit provider in compliance with the National Credit Act. Therefore, these financial institutions will lend you responsibly.
1. The National Student Financial Aid Scheme
The cost of university education is high and has the potential to become even higher, but NSFAS keeps making society realize that finding a credit provider who will pay for your studies is still a possibility.
2. Fundi
Fundi takes the pleasure of uplifting the lives of young South Africans through the process of affording them student loans.This online student loan system has enabled a number of qualifying customer’s education. It is an initiative that started in 199 and has promised to continue building and shaping South Africa into becoming an empowered nation.
3. FNB Student loan
FNB Student Loan allows you to begin your academic journey with a minimum R4000 loan. Having a student loan FNB means you will not have to wait on the line for hours to get assistance from a bank agent. You can withdraw money straight from your bank account if you need it.
4. ABSA
In applying for a study loan from us, you are placing all your financial trust in us to ensure that your academic dream becomes a reality. As long as you meet their requirements, you can apply and enroll at any university of your choice.
5. Nedbank
Nedbank student loans were created to assist you in your educational development.
At the end of the day, we want to be part of your progress and know that we too made it possible for you to reach where you are now.
What is the process of repaying student loans in South Africa?
Students usually have a grace period of 3-6 months after graduating before they have to start repaying the loan. To provide the young graduate with a chance of earning an income after graduation, the idea is fairness.
What are the tips for taking a student loan
The following nuggets are important to keep in mind when taking a student loan from any financial service provider:
- Keep your expenses low. Though it might be a little inconveniencing, it is important for the greater good. Live with roommates, friends or family members, use public transportation. There are a lot of ways to minimise cost, you just need enough discipline.
- While you’re still studying, this will enable you to have some extra cash to tackle any other miscellaneous expenses.
- Try to save as much as you can so you can have a lump sum going towards your debt when you finish studying.
- Start paying as soon as you find a job and skip no payments.
- Do not take out any more credit unless you can afford to do so
What to avoid when applying for a student loan
Even if they allow you to access money for your education, you should always consider your ability to repay them before you apply. In addition, borrowing money is a serious expense, so you should consider your financial situation before borrowing money.
- Money obtained from this type of credit should never be used for anything other than what it was intended for.
- Having debt at the start of your adult life is not a good idea. At all costs, do not take one if you don’t need it.
- Never take on debt without comparing your options first. There are some products that are better than others, and not doing your research could lead to missed opportunities.
Conclusion
You can always get a student loan to help you through your education. However, it is best to consider the risk factor and how to mitigate it in the future. Beware that prompt repayment of any form of loan boosts your credit score. Thereby improving your chances of getting another loan in the future. Finally, getting the right information would be very helpful in decision making as regards student loans. Some other times, some people get a personal loan to fund their education.