The #FeesMustFall movement in South Africa is a desperate plea by students to make further education accessible, as many don’t have access to further studies and those that do are lumped with enormous student loan debt. Currently, the average cost of a BCom degree for students in Johannesburg is around R32,560, while Capetonians can expect a bill of R68,135. While bursaries and scholarships are available to a select few, others will need to secure other types of finance to complete their degree. A student loan is the obvious next choice and instead of it being a tremendous debt burden, it can be seen as a way to secure a higher-paying job instead.
Pay Off Your Debt A Little Sooner
South Africa has some of the best student loan products as these are tailored to meet the needs of the students. They cover the cost of the degree, plus added funds for housing and study materials. These loans tend to offer lower interest rates than personal loans and students are only required to start paying back the loans once they’ve graduated. This is a good time to pay off the capitalized interest, which means the loans stop growing and by the time they graduate, they should ideally only be left with the capital balance.
Prioritize Paying Off Debt
While it’s tempting to find your own place and perhaps even buy a new car when that first salary comes in, it’s important to prioritize getting your finances under control from the very first paycheck. For those with student loans, this is a time to put in a little extra money to reduce those loans faster. While student loans might be charged at a much lower rate than a credit card, the interest payable is still higher than they would get by sticking that money into a savings account. Student loans are usually charged around 2% higher than the prime interest rate, but can be as much as 6% higher. Personal loans can go up to 15% higher than the prime lending rate. Savings, however, are usually far below the prime rate which means that paying off the debt allow the graduate’s money to go a little further.
Don’t Get Tempted To Split The Loans Between Products
Banks are retail environments which means that cross-selling is an important part of their client interactions. Students often get roped into applying for other credit products too, such as student credit cards under the guise that these can buy books. A credit card’s interest rate is far higher than a student loan, and should be used with caution. Everything to do with studying should be included in the student loan, and credit cards should be used for emergencies instead. Many student credit cards offer students an interest-free period, which means that students can settle their card before being expected to pay interest on it.
By knowing how to use credit and when, students can simplify their expenses long before they graduate.
Article by Cassandra Glass