Can I Apply for a Federal Student Loan In South Africa? Repayment and FAQs
College education can have really high costs and, not anyone is in the financial position to pay for it. Each year, more and more South Africans rely on student loans to overcome this issue. This article is for those who are trying to decide on how to finance education. First, I’ll expand on Federal Student Loans’ FAQ and also, I’ll state information about entities offering Student loans, their repayment options and what you need to apply with them.
As you know, there is what’s called Government-back loans that are loans the South African government subsidizes in order to make it possible for borrowers to get lower rates. These loans can be found in different areas and, one of them is in Education. Particularly for this sector, the NSFAS (National Student Financial Aid Scheme) is in charge of the Federal Student loans.
Next, I’ll elicit certain queries borrowers tend to have:
1- Do I have to pay back my Federal Student Loans?
Yes. This loan works similar to any normal loan. However, you will start repaying it after you finish your studies so, during your years of college; you can focus on your studies.
2- Do Federal Student Loans cover everything?
Everything depends on each student’s situation and need. But, even if a federal student loan is not enough to cover every detail, you could try to get a private student loan for the remaining amount. That’s a popular solution among student applicants.
3- Is it hard to get a Federal Student Loan?
As with all government loans, there’s high demand for them but, as long as you plan to study on a public university and you’re registered in it, you can apply for a federal student loan.
4- How much do you pay per month for a Federal Student Loan?
Federal student loans are repaid after you get your degree but also, after you start working. A great benefit is that the repayment will be stated based on your income and the capacity you have to repay it. Remember these loans are made to help you not only on your studies but also, on your finances. Following, I’ll explain how the monthly calculation takes place and, I’ll represent it with an example: The monthly installment, at the beginning, will be the 3% of the amount you earn in a year. Then, there’s the chance of increasing the percentage while your annual earnings increases. For instance, it can go up to the 8% of the yearly salary, providing such salary rises though time.
Example: if we imagine you earn R30000 per year, your monthly payment would be of R75, that is to say R900 in the whole year. If, when time goes by, your annual salary reaches up to R59300, you’ll repay R395 per month, which means R4.744 per year.
5- How many years does it take to pay off a Federal Student Loan?
As I mentioned in the previous point, once you get a job, the repayment term will be arranged. This means, the time repaying the loan will depend on two factors. One of them is how much you own, which varies according to the loan you took, and the other, your income. As it’s been clarified before, there’s an alternative to increase the monthly payment if your salary is higher than when you started working. Also, you can choose to arrange payments for a higher value and, in this way, cancel the loan earlier. So, you don’t have to worry about the time repaying the loan because, the repayment term will be arranged taking your income into consideration.
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6- What are the benefits of Federal student loans?
These loans work similar to private loans but, what makes them special is that the benefits for borrowers are greater. For example, as the government finances part of the loan, interest rates are lower and, consequently, the total cost of the loan is lower too. Apart from that, the repayment term is more flexible and customized to fit the borrower financial situation. For instance, the borrower won’t start repaying it until they get a job and earn a salary high enough to handle the payment and, monthly expenses.
An extra benefit is that, when you repay the loan, the entire money is invested on helping other students in the future. So, you take part of a circle that’s worth getting involved in.
Now, I want to expand on private student loans in case you decide to go for them as, federal loans may not be for anyone. Let me make clear there are many companies you can work with but, in this case I’ll focus on Absa. Among the choices they offer, to buy a car or house for instance, you can apply for a loan to pay for your studies.
What do you need to apply?
Besides being South African permanently living in this country, it’s important you can prove you have a steady income to rely on. In the case you don’t work, your parents can take the loan in your name as long as they can present a proof of income. It can also be a guardian or sponsor complying with the same requirements mentioned above.
Keep in mind, you can take the loan yourself on condition that you’re studying part-time and, working full-time and, of course, you have proper documentation for Absa to check on this information.
What about repayment?
This may be the best part of Absa’ student loans as, they present two options:
One option is to start repaying the principal and the interest charged immediately after the loan is approved by the entity.
The other option is to spend a year repaying only the interest and, after that time, the principal and interest will be included.
With these 2 options you are in charge of organizing your payments as you think is best for you.
After having dealt with this issue many South African students have to confront to, you are now one step closer to achieve your goals. Whether you qualify for a Federal Student Loans or, you prefer a private loan, I’m sure this article was useful to clarify your options. So, all you have to do now is to decide on the opportunity you want to take and, go for it!
Questions and answers
Is there another lending company offering student loans besides Absa?
Of course, there are several! For example, Standard Bank. Nedbank, FNB and, among others.
What’s the “missing middle”?
This term is used to refer to those families whose salary is between 350000 and 600000 rands. This amount won’t qualify them for a federal student loan but, they can’t afford a private loan either, that’s why they are named the “missing middle”.
Is there a limit on federal student loans?
There’s not a limit stipulated as the money borrowed differ in every specific case. Some loans are financed for over the entire qualification and, other for only one year.
Federal student loans offer the lowest rate.
I’ll take a chance with Absa, thanks!
I’m trying to decide what’s best for me and, this article was really helpful.