‘Student loan is better than a personal loan’ – expert speaks on tertiary funding

Registration, tuition, and accommodation fees—these terms are enough to spark a migraine for anyone who’s dealt with the stress of university fees.

Many South African households have turned to loans in desperate attempts to cover the cost of their children’s tertiary education.

If the Fees Must Fall movements are anything to go by, securing funding for tertiary studies is a struggle for many, limiting access to college or university to the lucky few.

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‘Missing middle’

While many students from low-income households sought financial relief from the National Student Financial Aid Scheme (NSFAS), the ‘missing middle’ have often found themselves left to fend for themselves.

These are households with an annual income between R350,000 and R600,000—often considered too rich for government funding but too poor to cover the cost of tertiary education.

Until recently, the missing middle weren’t specifically catered for by NSFAS.

Faced with limited funding options, the missing middle households have been forced to take out study loans from private entities to pay for their tertiary studies.

While a student loan sounds like the ideal alternative, some have considered getting a personal loan.

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‘Student loan is better’

Strategic Business Development Manager for Retail Credit at Sanlam, Ayanda Ndimande said a student loan is always better than a personal loan because of how it’s structured.

“Someone will stand surety for the student while they are studying, applying for the loan- and paying minimal premiums on their behalf. This is usually a parent or guardian.

“Once studies are completed, the loan is normally transferred to the student, and the premiums increase, irrespective of whether the student has found employment,” she explained.  

Ndimande also said that sometimes graduates could also approach their potential employer to negotiate a settlement of their student loan in exchange for equivalent years of service to their employer.  

“Conversely, with a personal loan, you pay high premiums from the get-go. Usually, the student applies for the loan directly because it is unsecured; that means it’s often harder to find people to stand surety as the premiums are much higher.”

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Light at the end of the tunnel

The Department of Higher Education recently launched the Missing-Middle Load Scheme for students whose annual household income is between R350 000 and R600 000.

Students applying for funding will have to tick some additional boxes to qualify.

• Must be accepted to study at a TVET college or public university for either undergrad or postgraduate studies.
• Can apply in years 1, 2 ,3 or 4.
• Must sign a loan agreement upon qualifying for funding.