Education post-18 is a different world than schooling so far, and a vast majority of that is to do with the fact that the individual involved in the schooling is now (in most cases), considered an adult. Up until this point, education decisions were made almost entirely by the parent involved and not the child; especially when it comes to finances. Now though the lucky ones may have a parent or guardian intervene at this point, the rest of us have to come up with payment another way. Here is an easy 4 step guide to help you on your journey to further education.
1: Considering Personal versus Student Loan
The most important starting place is to decide which loan repayment ‘bucket’ works best for you. Now the perks of each of these options and the ‘which is better’ debates vary from country to country. In South Africa, there is no maximum amount or cap on the amount that you can borrow for university tuition itself, but there is a cap of 60,000 rand for living costs and 20,000 rand for textbooks and equipment. In and of itself, the lack of ceiling on this borrowing makes it easier for a student with little current finances to apply. In addition to this, student loans are much easier to obtain with little assurance than bank loans, and often have lower interest rates.
Sarah Peta, an educator at Writemyx and Australia2write, noted that, “In South Africa, it is only interest that must be repaid while you are studying, and the further repayments start after a job-finding ‘grace period’. However, if you have the funds available and are eager to pay off your loan in as short a period as possible to have the debt lifted, a bank loan is a much better choice.” It all depends on your financial position as to what the best option is for yourself.
2: Weighing up Repayment Plan Options
As stated in the previous point, student loans stand out from the array of options which one might find when searching for a bank loan, due primarily to their repayment structure. Jenna Scarlet, a writer at Next Coursework and Brit Student noted that, “Because banks are independent institutions, they cannot afford to simply ‘give away’ the cost of a 3-year (at least) university programme and wait up to 5 years after an individual finishes to have that debt repaid. However, because further education is seen by the government as socially and economically beneficial, government-based student loans are much more flexible and long-term on repayment structures.”
However, this is not always seen as a good thing. For example, if you are working a steady job, only studying part time alongside a full-time occupation, or have a large amount of your own finances saved up for the particular purpose of paying off your loan as quickly as possible; a bank loan may be the better option.
3: Considering Interest Rates
For the most part, government-funded student loans will be likely to have substantially lower interest rates than personal bank loans. In South Africa, the average interest rate on a personal loan starts at around 15%, but the average student loan interest rate starts closer to the 10% mark. Student loan interest rates are determined by the length and mode of your course, as well as the year you are applying in. It is extremely important to be aware of the interest rate (especially whether it is fixed or variable) before you secure your loan.
4: Consider Liability and Surety When Applying
Before you sign on the dotted line for either a personal or student loan, you need to make sure you understand the principles of liability and surety. These rules are individual and differ both between student and personal loans, and also from bank to bank. Student loans conducted through some banks will need to be in the name of the student applying for the loan while others will allow parents or legal guardians to sign for the loans. When this happens, it is the parent or guardian taking the responsibility completely. This is often a good idea for incoming students with little financial knowledge or capability of their own.
However, if perhaps you go with a personal loan in your name, you may nee a sponsor to sign ‘surety’, which is a binding legal document stating that your sponsor will make repayments if you cannot. This is likely to be needed if you have no income or finances of your own.
Although you may not feel like an adult at the point of applying for university, from this point on, the world will begin to treat you like one. A base financial knowledge of finance, or at least your finances and potential finances over the period of your course is definitely a good idea when starting this process.
About the Author:
George J. Newton is a long-serving business development manager for Academicbrits.com and Phdkingdom.com. He has been married for ten years, and has three budding writers in his children, Ray, Jenna,, and George Jr. He also writes articles for Thesis Help.