We all know how important education is in our lives. It is the key to reaching our dreams and surviving the harsh world we’re living in.
However, the reality is that it’s not easy to finish school, especially with the expensive tuition fees and other costs accompanying it. Some just drop off since they’re unable to get a college degree because of financial concerns.
There’s a way around this. There are many lenders that can provide financial assistance for students in South Africa. By applying for a student loan, you can go to college and repay the debt back after you finish school.
Read on to know how to apply for student loans in South Africa.
What is a student loan?
A student loan is borrowed money that you can use to pay for your tertiary education. The borrowed amount can be used to pay for tuition fees, board and lodging, school supplies, and living expenses while you’re in school.
Student loans in SA have lower interest rates compared to other forms of loans. The rates are also fixed which means it won’t fluctuate in sync with the market’s prime rate.
Student loans are considered a ‘good’ form of debt. This is because you’re borrowing money to invest in something that will be worth more in the future than the loan you’re applying for.
How do student loans work in South Africa?
Student loans in South Africa have fixed interest rates and are relatively lower compared with other loan types. Financial assistance for students in SA goes through a faster approval process compared with other loan requests. The goal is to send as many students as possible into college without burdening the debtors.
Another advantage of loans for students is that you don’t have to repay the debt months after your application has been approved. Lenders will usually let you finish college before you’re required to start repaying the loan. Some may even allow you to pay for the interest while you’re still in college to prevent your debt from piling up.
If you remain unemployed for quite some time after graduation, your lender may grant you an extended grace period before resuming repayments.
Debtors who fail to complete their studies have no choice but to repay the full loan immediately.
How much money a student can borrow?
You can borrow varying amounts for funding your education, as different loan providers offer different terms. For example, FNB offers up to R80 000 per year that you study, while Standard Bank has no cap on the amount you can borrow to cover tuition fees. Different banks also offer different terms depending on what the loan will be paying for: while Standard Bank will lend you any amount to cover tuition fees, it will only lend out R20 000 to cover textbooks and equipment.
Technically, if you pick the right financial provider, you could borrow an unlimited amount to cover expenses while you’re studying. However, if you opt for a bank that has no cap on the sum it lends out, you’ll have to make sure you meet all the requirements, and your interest rate may not be the best in the business.
Further down in this article, we’ll dig into the details of the terms that South Africa’s student loan providers offer. But first, let’s take a look at the interest rates you can expect on your loan, and how to calculate your average interest rate.
What interest rate can I expect on my student loan?
There are a few options when it comes to interest rates.
- The average student loan interest rate is around 10%.
- You may get a lower interest rate if you’ve been studying for a year or more.
- You’ll get a higher interest rate if you take out a personal loan to fund your education.
- Some banks don’t offer a set interest rate – they tailor the rate to your circumstances.
Once again, the options vary depending on which bank or agency you opt to loan from. More on this below!
How to calculate the average interest rate on student loans.
Interest rates on student loans generally compound daily. This means that if you didn’t pay interest last month, you’ll simply have to pay double interest this month. The unpaid interest isn’t counted as “debt” that you must pay interest on.
If you’re waiting to complete your studies and land a job before paying off your loan, it’s still common practice to pay the interest off each month while you’re studying. Doing this ensures that the money you owe doesn’t build up over time. So grab your calculator: we’re going to help you to figure out how much you need to pay each month in order to keep that interest under control.
How’s how to calculate the average interest rate on your student loan in 3 simple steps.
- Calculate your daily interest rate first. Do this by dividing your student loan interest rate by the number of days in the year. This will give you the interest rate for every day that your loan is outstanding. For example, if the interest rate on your loan is 9%, you’re going to enter 0.09/365 into your calculator, and hit the “=” button. Here, the daily interest rate is 0,00025.
- Next, we’ll calculate how many Rands of interest you owe each day. This is as simple as multiplying your loan by your daily interest rate. If you took out a loan of R60 000, and your daily interest rate is 0,00025, you’ll punch 60 000 x .00025 into your calculator. The answer for this example is 15: you would owe R15 in interest for every day that your loan is outstanding.
- The last step is to work out your monthly amount of interest that is due. To figure out how much you’ll need to pay each month, times your daily amount of Rands owed on interest by the number of days in your monthly billing period (this is usually around 30 days). In our example that’s 15 x 30, which gives you a monthly sum of R450 that you’d need to pay to keep interest from accruing.If you haven’t been doing monthly payments, you can multiply the number of days since you last paid by your daily amount of Rands owed. This will give you the amount of interest that you currently owe.
Where to apply for student loans?
In South Africa, you have the option to take out a loan from several different providers.
- You can take out a loan from any major South African bank. These include ABSA, FNB, Nedbank and Standard Bank, Capitec and African Bank. To apply, you can simply visit the nearest branch.
- You can apply for a loan from FUNDI. FUNDI (previously EduLoan) is a financial organization committed to helping students in this country achieve their goals. They have an excellent website where you can apply for a student loan. Later in this article, we’ll detail exactly what you need to know about applying for a student loan here.
- The National Student Financial Aid Scheme (NSFAS) is a government-funded operation that’s focused on helping students from underprivileged backgrounds enter university. As of 2019, it no longer offers student loans: instead you can receive a bursary if you’re a South African citizen and meet certain other criteria. Bursaries help to cover everything from university fees and textbook costs to living, accommodation and transport costs. You can apply for a bursary online at the end of each year.
Each student loan provider has its pros and cons. We’ll cover these below. But first, let’s go through what you’ll need to have with you when you’re applying for a loan.
Applying for a student loan
Here’s what you need to prepare in applying for a student loan in South Africa:
- Your bar-coded ID book
- Your parent’s ID book
- Your parent’s payslip
- Proof of address
- Proof of enrollment showing you are qualified to enter a tertiary institution
Present these documents to your lender and complete the forms they’ll be requiring you to answer.
Make sure that the institution you’re entering is qualified and recognized by your lender. Not all schools accept payment through student loans.
Lenders will look into how much your parents earn each month. Some will approve only those who have parents earning at least R5 000 or more each month. The loanable amount lenders will approve depends on your parent’s income and their credit history.
You should already have a number in mind of how much you want to borrow for your student loan. When you’re asked to give a number on how much your monthly expenses are, provide them with a low number. It doesn’t have to be too realistic. The computation lenders use won’t be able to determine whether it’s possible or not for your family to survive with the monthly expenses you gave them. This tip may make your chances of getting approved higher.
FUNDI Student Loans
FUNDI is a highly popular provider of student loans across the country.
They can help to finance:
- Tuition fees
- Registration fees
- Study tools
They may also help to pay any outstanding balances.
FUNDI is incredibly up-to-date when it comes to their tech. It’s easy to run your account from their website. They handle your payments, plus they offer a FundiCard that helps you manage your spending. When you apply to register online, you can expect a quote within two to three days.
Best Student Loans Available in South Africa
These are currently the best places to apply for a student loan in South Africa.
- Interest rates are low and you can loan as much as you like for tuition fees.
- They’ll cover a wide range of costs.
- They offer the lowest interest rates, and again, the sum you can loan is potentially unlimited.
Top Banks that offer Student Loans
Although you can get a loan from any of our country’s major banks, each bank offers different terms. Below we’ll detail what you can expect from each bank when you apply for a student loan.
# Standard Bank Student Loans
Standard Bank offers a range of options when it comes to student loans… as well as lower than average interest rates.
Here’s what Standard Bank is willing to pay for.
- Registration fees.
- Tuition fees: you can loan a minimum of R5000, but there’s no maximum; you can get as much as you like for tuition.
- Accommodation: they offer up to R60 000 per year, but you need to be able to show them a lease agreement.
- Textbooks and equipment: up to R6000 if you have no proof of costs, up to R20 000 if you do.
Here are some additional things to know before taking out a student loan at Standard Bank.
- Their usual student loan interest rate is 9,75%.
- Your chosen course needs to be at least three months long, and it needs to take place at an accredited institute.
- You must use some of the loan to cover tuition fees.
- The person responsible for your loan if you default – your “surety” – must earn at least R3000 per month.
- You have a 6-month grace period after completing your studies before you’ll be required to start making repayments.
- Part time students must earn at least R5000 a month before they can take out a student loan.
You can find out more about Standard Bank via their website: www.standardbank.co.za.
Or, you can give them a ring on 0860 123 000.
# FNB Student Loans
FNB’s student loan options are wonderfully varied, but the person responsible for the loan needs to have a higher income than with the other major banks.
Here’s what FNB will cover.
- Your tuition fees.
- Textbooks and other study material.
- Devices and equipment.
Here are some additional things to know before taking out a student loan at FNB.
- The interest rate is personalized, but it could be as low as 10,5%.
- You can loan between R4 000 and R80 000 per year that you study.
- Credit life insurance is compulsory.
- The person responsible for the loan must earn at least R6000 per month.
- The course needs to take place at an accredited institute.
You can find out more about FNB via their website: www.fnb.co.za.
Or, give them a ring on 087 575 9404.
# Capitec Student Loans
Capitec doesn’t specifically offer student loans. However, you can take out a personal loan with Capitec to help cover your student expenses. Here’s how it works.
- You can loan up to R250 000 and pay back over a period of time that you choose – anywhere between 1 and 84 months.
- Your interest rate will depend on how long it takes you to pay back the loan, with the lowest interest rate being 12,9%.
- The terms of your loan depend on details such as your income, credit history, financial stability, etc.
- This is an excellent option for when your financial needs don’t fit the requirements put out by banks offering full student loan packages.
- You can get a loan estimate online in a matter of minutes.
You can find out more about Capitec via their website: www.capitecbank.co.za.
Or, give them a ring on 0860 10 20 43.
# ABSA Student Loans
ABSA offers student loans with the lowest interest rates in the country.
Here’s what ABSA will pay for.
- Prescribed textbooks.
- Registration fees.
- Tuition fees.
- Any computer equipment you’ll need for your studies.
Here are some additional things to know before taking out a student loan at Standard Bank.
- Their interest rate on a student loan is 10%.
- And if you can find a better interest rate anywhere, they’ll beat it!
- You can loan from R15 000, up to any sum you choose.
- The person responsible for the loan must earn at least R3000 a month.
- The course must be longer than 2 months.
- You can study at any registered institute, including online courses.
- You can pay interest only for just 12 months.
You can find out more about ABSA via their website: www.absa.co.za.
Or, give them a ring on 08600 08600.
# Nedbank Student Loans
Nedbank’s student loan options are somewhat limited compared to the terms the other large South African banks offer.
Here’s what Nedbank will cover.
- Tuition fees.
- Accommodation that’s been accredited by the university or campus.
Here are some additional things to know before taking out a student loan at Nedbank.
- The person responsible for the loan must have their main transactional account at Nedbank.
You can find out more about Nedbank via their website: www.nedbank.co.za.
Or, you can give them a ring on 086 0 555 111.
# African Bank Student Loans
Like Capitec, African Bank doesn’t offer loans specifically targeted at students. However, you can take out either a personal loan or a “15% loan” to fund your studies.
- With the 15% percent loan, you’ll need to pay the loan back within 12 to 72 months. There’s no limit on the amount you can loan.
- With the personal loan, you can borrow up to R250 000, and payback in between 7 and 72 months.
You can find out more about African Bank via their website: www.africanbank.co.za.
Or, you can give them a ring on 0861 111 011.