Last Updated on January 6, 2023
Most students need financial assistance to continue their higher education because it is expensive. Usually, the only way to manage tuition fees is to get a bursary from a reputable institution. However, although bursaries are the best option for many students entering higher education, the reality is that not everyone will be able to get a bursary, but this should not stop students from continuing their studies. Student loans aim to fill this gap and ensure that students can attend college and start paying for it when they start working.
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What Is A student Loan?
A student loan is a type of financial assistance provided to students by credit providers which allows students to pay for the costs associated with their studies. Students are then only expected to only repay their student loans once they’ve finished their studies.
The main benefit of a student loan is that it allows the students to pay all the costs associated with their studies and begin repaying the loan when they start working.
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Students may need to nominate a surety to pay interest on the student loan while they are studying. The monthly interest payments are just a percentage of what the student/parent would have been required to pay if they were paying for the course without financial assistance.
Are Student Loans a Good Choice?
The answer to this question is circumstantial. Whilst student loans may be a great way to fund one student’s studies, they could be daunting to another as their circumstances may be vastly different.
To understand whether or not you should apply for a student loan, you should ask yourself the following question: If I do not take out a Student Loan, will I still be able to pursue my studies? If the answer is no, then it is advisable to apply for a loan. If, however, you can still pursue your studies through other means, then it is advisable to avoid taking out a Student Loan.
It is always beneficial to start your adult life off with no debt, however, if the Student Loan will aid you in having a foot forward in the career world (i.e. allow you to pursue studies and obtain a qualification) then it is most likely a good idea.
What are some things to consider before taking out a Student Loan?
- The interest on Student Loans is NOT zero-rated. Most people believe that Student Loans have no interest or have an interest rate that is minute. This is NOT the case. If anything, Student Loans have a large amount of interest and often exceed those of any other household debt.
- Studying away from home is more expensive. If you study away from home, your 4-year degree will most likely cost about R400 000. This is very important to note as you should carefully consider your university options before you apply. Whilst many students may be longing to move out from home, something to consider is that the price of loan repayments may not be worth it. Financial institutions that provide Student Loans calculate how much a student needs to repay after graduation based on their salary. If you are studying while you are still living at home, you could look at only paying about half this amount, as you won’t need money for accommodation.
- The financial institution usually allows the student 3-6 months after graduation before they have to start repaying the loan. This is so that the student can have a fair amount of time to secure a job after they graduate. If, however, the student has not found a job in this time frame, the parent/ guardian will then be required to cover the monthly repayments.
- The money from student loans gets deposited straight back into your bank account. Be sure to use this money towards your studies. It is advisable to pay for your tuition upfront with your Student Loan money, and often, some tertiary institutions offer a discounted rate for upfront payments. Should you have any money left over from your loan, do NOT spend it on unnecessary expenses. Rather keep it for other study-related costs.
What are the Student Loan requirements in South Africa?
There are many financial institutions in South Africa, each of them with its own set of requirements for your study loan application. However, there are some mandatory requirements for all institutions:
- You must be over the age of 18
- The main debtor (i.e. your parent/guardian) who is responsible for signing the loan for you, also known as your “surety”, must earn a certain minimum income each month
- You must be registered as a student at a South African tertiary institution
What documents do you need to apply for a Student Loan?
- Your Identity Document or Identity Card
- Your parent(s)/ guardian(s) Identity Document or Identity Card
- Your parent(s)/ guardian(s) proof of income (i.e. latest payslip)
- Your parent(s)/ guardian(s) proof of address
- Proof of enrollment at a recognized tertiary institution
When you go to the financial institution, you will hand in all these documents, fill in relevant forms, and provide the amount you need to cover your studies. When filling out the relevant forms, it is important to know the full names and the level of your degrees. The amount that the financial institution will grant you will depend on your parent/ guardian’s credit history and income bracket
List Of Student Loans In South Africa
1. Fundi
2. Nedbank
3. Standard Bank
4. Absa
5. Capitec
6. FNB
Where To Apply For A Student Loan In South Africa?
1. Fundi
Fundi offers “Educational loans” or “study loans” that enable students to attend university and not worry about the costs until they obtain their qualifications.
They offer comprehensive loans that cover all costs associated with studying. In addition, they also offer loans for specific costs. This includes loans for education tools, loans for study devices, and accommodation loans.
Visit the Fundi website for more information. You can also request a callback where a Fundi staff member will tell you everything you need to know about Fundi student loans.
2. Nedbank
Nedbank offers student loans with competitive interest repayment rates, ensuring that individuals can obtain their tertiary education qualifications and achieve their academic goals.
The Nedbank student loan covers tuition fees, books, stationary, housing expenses, and other additional costs associated with tertiary education.
Part-time students are required to start repaying their Nedbank student loan amount and interest at the beginning of the academic year.
Full-time students are required to nominate a surety to make monthly payments on the interest of the loan. The student will start repaying the loan amount and interest once they’ve completed their studies and secured employment.
3. Standard Bank
Standard Bank offers student loans that allow individuals to finance full or part-time studies. They can choose to take a student loan to pay for just their tuition fees or a more comprehensive loan that may include money for accommodation and study equipment.
Part-time students are required to pay the loan while they study.
Full-time students will only be required to start repaying their student loans once they completed their studies. They are also granted a grace period of six months after completing their studies before taking over the loan repayments.
4. Absa
Absa bank offers student loans called study loans for students to finance full or part-time courses.
Students must borrow a minimum of R15,000 to pay for their tuition fees. They can also choose to borrow a higher amount to cover most of the expenses they may accrue while they are studying.
The loan applicant will be required to nominate a surety in whose name the loan will be. This surety can be a parent/sponsor/guardian who has proof of income. Part-time students who are employed on a full-time basis and have proof of income can also apply for an Absa student loan.
This amount of interest you or your surety will pay on an Absa study loan will be based on your credit risk profile and you may be required to pay higher interest rates than the prime lending rate based on your risk profile.
5. Capitec
Capitec offers a Credit-for-education system. While this is similar to other student loan options in South Africa, this loan option caters specifically to students who study at a set list of institutions that have partnered with the bank.
Each institution has its own process through which students can apply, but they all direct the student to a page where they can get an estimate for their loan to determine if the student qualifies.
6. FNB
FNB bank offers student loans by which students will enjoy a personalized interest rate and an interest-only repayment, for a 12-month period. This personal interest rate starts from the prime lending of less than 0.5% and up to R300 000 to fund their tertiary education journey.
Choosing to take a student loan could have an impact on your personal finances long after you complete your studies. It is therefore crucial to do extensive research to determine which student loan option is best for you.