University education is your ticket to a well-paid job, successful career and good lifestyle; at the same time, the higher education in South Africa is very expensive.
Many families do not have sufficient savings to support their children throughout university. In this situation, a student loan is an effective solution. Find out how it works.
There are two types of student loans which you should consider
There are ones which are available via the National Student Financial Aid Scheme (NSFAS) which is managed by the government.
There are also student loans from private lenders including the big four banks and some independent credit providers.
NSFAS Student Loans – Financial Aid
The NSFAS loans are available to South African students who are enrolled in one of the 25 public universities of the country. They are designed to help you cover all of your expenses including tuition fees, accommodation cost, food and travel expenses and spending on books and materials.
The granted loan amount is determined on an individual basis. The interest rate is 80% of the repo rate. This makes it considerably lower than the interest rates charged by banks.
You can apply for a NSFAS student loan directly online.
In order to qualify, you have to pass the NSFAS Means Test and to have good academic performance.
There are no financial or collateral requirements which parents, guardians or sponsors have to meet.
The repayment of the government student loan begins only after you graduate and start earning an income which is higher than R30,000 per year.
If your annual income is lower than R59,000, the payments will be 3% of your yearly salary. If it is higher, then they will be equal to 8%.
Student loan from one of South Africa's Banks.
These student loans are also intended to cover all of your expenses as a student including tuition fees, accommodation expenses and expenses on textbooks, study materials and travel.
However, they work slightly differently.
A surety has to apply on your behalf. This is typically a parent or a guardian, but it can be a sponsor who agrees to support you. The surety has to have sufficiently high income and sufficiently low debt plus clear credit history in order to secure the loan.
The loan amount is determined individually based on the needs of the student. The disposable income of the surety is also taken into account. The interest rates are higher than those on the NSFAS loans.
However, they vary from one lender to another so it is important for you to compare as many different offers as possible.
Rates will depend on the creditworthiness of the surety as well.
The repayment structure of the bank student loans is divided into two periods.
The first period encompasses the time while the student is in school. During this period, your surety will have to make interest payments only. When you graduate, you will have to pay back the remainder of the interest and the principal in the form of monthly instalments.
The repayment term will be fixed in advance.
Grace periods are granted to graduates who have to complete an internship or do voluntary work.
It pays off to compare the different student loan options before you apply for a programme in a university in South Africa.