What are Student Loans?

What are Student Loans?

Student Loans are forms of finance that are offered to students which can be used to pay off education-related expenses. These loans are specifically designed to be used to pay tuition, equipment, textbooks and accommodation. 

Generally, students aren’t required to pay the loan back until the end of a grace period. In addition, student loans are often better preferred than personal loans because many of these loans are offered to students at a lower interest rate.

According to US-based non-profit, College Board, the United States is the most expensive place to study in the world. In addition, according to the Federal Reserve Bank of New York, student loan debt is the only form of consumer debt that has grown since the peak of consumer debt in 2008.

This is an indicator of the value placed on tertiary education. More people are willing to spend on their tertiary education costs so they can improve their standard of living or progress career-wise. In South Africa, more people are opting for student loans as a way to finance their studies.

Studies have also indicated that more South African students are not managing to repay student loans. It’s important for students who take out student loans to be aware of the costs involved.

Most mainstream banks don’t have much information relating to student loans, as some banks offer these loans as personal loans.

In the case of The National Financial Aid Scheme (NSFAS), since inception in 1991, the scheme has assisted 1.5 million students. Annual loan repayments have steadily been decreasing, with repayments decreasing from R636 million in 2010 to R247.5 million in 2015.

Tips to keep in mind when looking for student loans:

  • Take out loans from registered institutions
  • Keep track of your balance
  • Pay the debt as soon as you start earning a salary
  • Set a time frame for repayment of the loan
  • Don’t stop paying if you are struggling to find employment
Categories: Student loans