Currently, the average cost of a degree for students in South Africa is around R62,000. While bursaries and scholarships are available to a select few, others will need to secure other types of financing to complete their degree. A student loan is the obvious next choice, and instead of being a tremendous debt burden, it can be seen as a way to secure a higher-paying job instead.
Pay Off Your Student Loan A Little Sooner
South Africa has some of the best student loan products, as these are tailored to meet the needs of 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 capitalised interest, which means the loans stop growing, and by the time they graduate, they should ideally only be left with the capital balance.
Prioritise Paying Off Your Student Loan
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 prioritise 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 allows the graduate’s money to go a little further.
Don’t Be 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 that of 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.