Tertiary studies are expensive, there’s no way around it. Luckily though, you have options to finance it – student loans in South Africa are a realistic option, and they are readily available.
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
- 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.
- If you study away from home, your bill over a 4 year degree is likely to come to around R400,000. Carefully consider all of your university options. You may be itching to move out and be independent, but the price of the repayments may not be worth it. They calculate how much you need to repay after graduation based on your salary. If you study while living at home, that’s closer to R200,000 to repay. It’ll take half the amount of time to repay a loan if you stay at home. Carefully consider this when getting a loan.
3. The money from the student loans gets deposited straight into your bank account, and you can use it as you please. You can protect your future by not spending the loan money on anything except your direct study costs!
Students often pay their tuition fees up front with student loan money, and when they see they have money left over, they spend it on other things not directly related to study costs. This can have serious consequences later when the loan needs to be repaid with interest!