Managing your student loan
Amid cries for historic student debt to be written off, or at least not affect acquisition of qualifications and academic records, universities are gearing themselves up for a new decade of young South Africans who will take to lecture halls.
Many of these students will utilise student loans to finance their studies and as things stand, will be required to repay them. But are they equipped with adequate financial know-how to make wise financial choices in the process?
Herman Lombard, Founder and Executive Director of financial services provider African Unity, believes that investing in education is both a moral and an economic imperative and that financial education should be part of the school curriculum from an early age in order for young adults to be equipped to make educated financial decisions, including financing their tertiary studies.
“Forward thinking financial institutions have initiated Free Financial Education (FFE) programs which cover the core aspects of personal financial management. This equips learners with strategies to make sensible decisions around further education, to avoid debt and invest wisely in themselves going forward”, he says. He adds that instilling the country’s youth with a solid foundation in financial management has the potential to benefit the economy for generations to come.
For students applying for study loans, this could include researching the available work opportunities, and expected income for their chosen field, to ascertain whether there is a good chance of earning enough to easily repay the loan.
While a full bursary – typically a full study grant which is repaid in the form of employment by the donor company – is ideal, most students will not qualify for this funding, and will be forced to take on a student loan to cover the costs of their studies.
Student loans must be repaid with interest, especially those granted by banks or other financial institutions. The interest payments start when study begins, but repayments on the actual capital amount need only commence three to six months after graduating, providing some leeway in which to seek work. Failure to repay the loan may have a negative effect on your credit rating and could hamper future financial plans.
The government’s NSFAS loans work slightly different and need only be repaid once you have graduated and secured employment to the value of at least R30 000 per annum. NSFAS loans are available to those whose family is deemed financially disadvantaged as determined by the NSFAS criteria[ii]. All universities have a Financial Aid office where prospective students can apply for loans, grants, scholarships and bursaries.
Working while you study is a key strategy for staying on top of student loan repayments, the interest of which is comparable to most common debts. The university itself is the best place to start your search. Consider working as a tutor, librarian, research assistant, campus guide, or dormitory sub-warden. Also consider positions which interface between the institution and the wider world, such as campus-based brand ambassador, or an internship at an affiliated institution.
Take advantage of your university’s internet connection. Many flexible jobs exist in fields such as teaching, IT and social media, all of which can be done remotely, online.
If this fails, take your search to the community. Working for a small local company will have the added benefit of exposure to the modern business environment, thus providing valuable work-experience.
Although jobs are scarce, particularly in SA, the modern economy is one in which almost every aspect of life can be a commoditised. The “sharing economy” (schemes such as Uber, Air BnB, and freelance food delivery networks) is an example of this and offers feasible prospects for part-time work.
Lombard believes that while student loans can represent a path to a prosperous future, they can also contribute to unnecessary anxiety if students are not adequately equipped to navigate the complex, often unstable economic environment we find ourselves in. He adds that Free Financial Education initiatives can ensure that prospective students possess the necessary knowledge to make astute choices with regard to bursaries and loans.
“Equipping young adults to be financially savvy will not only assist students to manage their loans but will help build financial resilience for the rest of their lives”, concludes Lombard.