2 different types of student loans that will help you and maybe destroy you

Mar 07, 2016
Author: Ean Barnard

In the light of recent developments regarding tuition fees at universities, credit suppliers are looking into innovative ways to secure your and South Africa’s future. Student loans have always been a tricky subject since the success of a loan’s repayment rides on so many factors. Yet, despite these challenges, it will actually serve as steps on a stairway to greatness!

Student loans vary in amount, interest rates, pay back periods, the way of repayment etc. but usually it requires the service of interest rates in the time whilst the student studies. The repayment of the loan then starts when the student graduates

Since the dawn of time the creditor has been lurking over the shoulder of the debtor. Raking in the cents of the borrower with ingenious devices like interest rates, monthly instalments and registration fees. This is a giant misconception established by millennia of ill informed customers with poor financial education.

 

Studying with a loan should never be frowned upon. It gives so much peace of mind knowing that you will be able to graduate without losing an arm and a leg in the process. Now with all that said what are the two ways to study with a loan? Listen closely:

  •         A student loan against your name.
  •         A student loan signed by a principal debtor.

A student loan against your name requires less admin seeing that the agreement is between you and the credit provider. If you have the capacity to carry a student loan – go for it! For the less fortunate it may get rough midway through your studies. Being a full time student puts a strain on your ability to earn income. It may become increasingly difficult to service the interest on the loan during those exam periods.

A student loan signed by a principal debtor is a great opportunity for someone with no access to bursaries and scholarships. A principal debtor is a close relative or friend that is willing to sign as the one responsible for the student loan. The agreement obviously requires criteria like a registered student and yearly renewal processes, but someone offering you their capacity to carry your student debt is an amazing opportunity. However the pitfall to avoid is the sudden disappearance of the principal debtor. Make sure that the person signing on your behalf is to be trusted and make sure that coverage and ways to cede the responsibility of the loan exists. To cede a loan’s responsibility means you transfer the responsibility of a loan to another principal debtor. This is crucial to ensure that you will be able to finish your studies in the event of the death or disappearance of the principal debtor. So give your mom the joy of packing your lunch box for the last time by choosing a loan through the signing of a principal debtor (don’t worry you’ll soon taste the freedom of studying).

Student loans are actually such a catch 22 in itself. It is the supply of an opportunity of education, yet it requires some education to know which loan will suit your pocket. Scores of post graduates sit with a wealth of knowledge, but due to student debt they have holes like mine shafts in their pockets (that’s probably why ripped jeans are in fashion now).

Take your time, take a breath before you dive into this. You don’t want a student loan to come back after 3 years (or more) and haunt you in the form of interest on interest. Let’s be wise and avoid the financial cancer of today. You will graduate with a great future!

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