Higher education is like an investment in a brighter future and a step toward the life and career of choice. But it is also a considerable financial commitment.
Financial constraints can be a hurdle for candidates seeking to pursue higher education, given the rising costs. Due to a lack of funds, many students in South Africa seek financial assistance each year for their higher education. Student loans can be a viable option for such candidates.
In that context, it is necessary to have an idea about these loans. This article will inform you about them and other related details.
Table of Contents
What is a Student Loan?
Student loans are a type of loan that helps students finance education-related expenses. These loans can cover the tuition fees and costs for study materials, boarding, and food. A student loan must be repaid with interest. This makes it different from bursaries, grants and scholarships, which do not need to be repaid.
Choosing the right education loan in South Africa is of utmost importance, as it helps ensure that no additional financial burden arises from debt and the repayment schedules.
Know about Student Loans for International Students in South Africa.
How Student Loans Work in South Africa?
Student loans, or education loans, allow students to borrow money from loan providers to cover the costs related to higher education. The money is lent to individuals at a certain student loan interest rate. This rate plays a major role in determining the final repayment amount.
The total loan amount students can obtain typically depends on the projected cost of attending a particular higher education institution, excluding any scholarships or grants they receive.
In many cases, loan providers offer a grace period after which the repayments need to begin.
Read: Student Loans vs Personal Loans in South Africa – Key Differences
Types of Student Loans
In South Africa, different types of education loans are available, and it is necessary for loan seekers to have an idea about these. The types mainly include bank-issued education loans, government-issued education loans, and loans issued by independent credit providers. The table given below highlights these types of loans along with some specific related details:
| Sl. No. | Type of Student Loan | Provider | Repayment | Interest |
| 1 | Bank-issued education loans | Top banks in South Africa, like Standard Bank, First National Bank, Absa Bank and Nedbank | Repayment terms can vary among loan providers. Individuals must consult the specific official sources to confirm the same. | Interest rates can be customised, vary across loan providers, or be available at a prime rate. |
| 2 | Government-issued education loans | National Student Financial Aid Scheme (NSFAS) | The student needs to start repaying the accrued interest and the loan amount in monthly instalments from their first month of employment | The interest rates are highly competitive and can be lower than the private loans issued by banks and independent credit providers. |
| 3 | Loans issued by independent credit providers | Independent credit providers like Fundi or Eduloan | Repayment terms can vary across loan providers. Individuals should consult with the official sources to confirm this. | The interest rates can be higher than the prime rate of banks. |
Also read: Financial Aid vs. Student Loans: What You Need to Know.
NSFAS vs Private Student Loan
Loan seekers often find themselves deciding between NFSAS and private student loans. Making an informed decision on this part will be easier if one has a detailed insight into these two types of education loans. Which of these two options is the better choice depends on an individual’s requirements, circumstances, and preferences.
The table given below compares these two loan types:
| Sl. No. | Education Loan Types | Description |
| 1 | NSFAS Loans | It can be an excellent option for those who want to attend public universities. The interest rate that NSFAS offers for government student loans is highly competitive. |
| 2 | Private Loans – includes loans from independent credit providers and banks | The education loans that the banks offer typically need a guarantor. The interest rates for a private loan can be higher than those for an NSFAS student loan. The private loans cover a number of expenses related to the institution and also provide significant flexibility. The independent credit providers provide tailored loans to the students, which also come with unique terms and advantages. |
Check this: Best Student Loans in South Africa – Learn How to Make the Correct Choice
Student Loan Eligibility & Requirements
The eligibility and requirements for student loans can vary across different loan providers in South Africa. However, there are general requirements across lenders that loan seekers must meet.
Take a look at these requirements to gain a better understanding:
- The applicant must be a citizen or a permanent resident of South Africa
- The applicant should be over 18 years old
- The primary debtor (guardian or parent) should meet the minimum income requirements and have a steady income.
- The applicant should be officially registered as a student at a recognised South African tertiary institution.
In addition, individuals need to submit these documents to prove their eligibility:
- Proof of enrolment at a recognised tertiary institution in South Africa
- Certified South African identity card or document
- Proof of income for the parents or guardians
- Proof of residential address of the parents or guardians
- Identity card or document of parents or guardians
How to Apply for a Student Loan in South Africa?
Some candidates, especially first-timers, can find the student loan application process difficult to navigate. But it is actually a straightforward process if an applicant follows a step-by-step approach. While the process may vary across loan providers, there are some steps that are common.
Have a look at them:
- Step 1: Conduct thorough research on loan providers by reviewing their eligibility criteria, repayment terms, interest rates, and other vital details to choose the right one that aligns with your requirements, circumstances, and preferences.
- Step 2: Gather all documents required for a student loan.
- Step 3: Fill out the application on the loan provider’s official portal, complete all required processes, and submit it on time.
Benefits of Student Loans
Career ambitions should not be limited by financial constraints. A student loan can help overcome the hurdle posed by a shortage of funds. A closer look will help you understand that there are multiple benefits of student loans.
Check them here:
- Many loan providers support education at SAQA-approved institutions that are outside South Africa. This can help you achieve your goal of gaining international exposure.
- Student loans typically come with personalised interest rates that are lower than those for credit cards or personal loans. This implies less financial strain over time for students, making it a highly sustainable way to invest in studies.
- The loan can cover more than the tuition fees and classroom expenses, supporting the full student experience.
Common Mistakes Students Make
Student loans offer aspiring students the much-needed funds to pursue higher education. The process to acquire these loans is straightforward. But some mistakes can jeopardise one’s goal to obtain the loan or make the process unnecessarily difficult. You should be aware of these common mistakes to avoid them in your case.
Take a look at the common mistakes:
- Not conducting thorough research on multiple loan providers can lead you to an option that may cause financial strain in the future.
- Failing to submit the necessary documents can result in rejection of the loan application.
- Applying for a loan without confirming eligibility can result in rejection if the criteria are not met.
- Misunderstanding the loan terms, including repayment terms, can lead to additional stress and confusion in the future.
Expert Tips for Smart Borrowing
In addition to the common mistakes related to acquiring a student loan, it is important to know how to borrow in a smart way. Tips on smart borrowing may be helpful for students facing this process for the first time.
Have a look at some tips:
- Compare multiple lenders and their terms to choose the best student loan in South Africa.
- Borrow a loan amount that you truly require.
- Understand the loan repayment terms well before borrowing.
- Check for hidden costs associated with the loan before applying.
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Conclusion
Student loans can be a go-to option if you want to pursue higher education but lack the funds for the same. It is essential to understand the available options, plan for repayment and borrow responsibly. Furthermore, it is important to avoid the common mistakes in the process.
Through informed decision-making, you can minimise debt, which can set you up for financial success after completing your studies.
Apart from education loans, reputable institutions in South Africa, such as Regenesys Education, also offer financial assistance to students.
Contact us to know more.
FAQs
What is a student loan?
A student loan is a type of loan that helps individuals finance the expenses related to their studies. These loans need to be repaid, including interest.
How much loan can a student get?
The amount of student loans an individual can obtain may vary depending on the lender and other factors. Individuals must consult with the official sources to confirm this.
How do student loans work in South Africa?
Banks, NSFAS and independent credit providers offer student loans in South Africa. These come with an interest rate that determines the final amount to be paid. The loan amount to be obtained can depend on the projected cost of studying. In many cases, individuals get a grace period after which the repayments need to begin.
Can I get a student loan without income?
Yes, you can get a student loan without income.
How long does the student loan repayment take?
The repayment terms of a student loan can vary across loan providers. Many of them allow individuals to start repaying after a grace period. It is necessary to consult with the official sources to confirm the actual terms.
What happens if I don’t repay my student loan?
Failing to repay a student loan can have long-term financial consequences. It can reduce an individual’s credit score and may make it highly difficult to secure loans in the future.
