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Shop around for the best student loan deal A good interest rate depends on your academic record, how you negotiate and the financial status of your guarantor, writes TERRY BETTY MATRICULANTS heading for university and technikon next year have more to look forward to than parties, social clubs, sports and initiation week - many will, for the first time, start taking responsibility for their finances. Tertiary education is becoming more expensive as subsidies and bursaries are cut, forcing more students to turn to the banks. Students should shop around or negotiate with their bank to get the best deal in the booming business of student loans. A survey of the banks shows that while their student loan products are fairly uniform and inflexible in what they offer to first-year students, they are more flexible in later years. This is briefly what each bank will offer you: Nedbank targets students studying for a professional qualification, for example, law and engineering. The bank will lend full-time undergraduates a maximum of R10 000 a year and part-time students up to R6 000 a year. Loan amounts to postgraduates are negotiable. Nedbank also offers a special equipment loan of R5 000 a year. The interest on the loan has to be serviced during the study period, and the capital amount repaid over one and a half times the period of study, with a maximum of seven years. First-year students pay at the prime overdraft rate (currently 19,25%), but from second year onwards they pay interest at 75% of the prime rate. The rate is negotiable to postgraduates and students beyond their fifth year. Standard Bank will lend a maximum of R8 000 to first-year students, increasing this amount each year up to R10 000 for sixth-year students. The interest rate ranges from prime plus 1% for first-years, to prime less 4% for fifth-year students, and is negotiable thereafter. In the first two years of study, the student is charged 1% less if the person standing surety for the loan (the guarantor) is a Standard Bank customer. Servicing the interest during the years of study is optional, but is recommended because interest is compounded which inflates the debt. Interest is dropped by 1% on the outstanding debt after the student graduates if she opens a packaged account with the bank. The repayment period is the same as the number of years as the loan was used. First National Bank will consider lending money to any student accepted by a university, technikon or any college teaching Unisa subjects. It will lend up to R25 000 a year, depending on the student's needs and the ability of the guarantor to guarantee payment. The interest charged depends on the degree being studied and on the academic year, but is negotiable. For instance, a first-year student in a non-professional course would pay at the prime rate; a first-year student on a professional course would get prime less 1%; and a first-year medical student could get prime less 3%. Interest must be paid monthly during the study period. The bank will grant up to a one-year moratorium on repaying the capital loan after graduation to allow the student time to find a job. ABSA will grant loans to students who are SA citizens and who achieved at least a C average for matric if they are entering first-year university, or at least a D average in their previous year of study. While loan amounts differ substantially for different disciplines and academic year of study, the average loan is R4 000 to R12 000 a year which covers registration and tuition fees, books, special equipment and assurance premiums. Interest must be serviced while the student is studying, and capital is repaid after graduation over the same number of years as the loan was taken up. A moratorium on the repayment of capital is allowed in respect of articles, hospital year, internship and so on. All the banks require the student to take out a life assurance policy, and a suitable person to stand as guarantor for the loan. Financial institutions are tight-lipped on the sort of interest rates they would offer preferred students, say, a final-year medical or actuarial student, as this is a tightly contested market and they do not give these rates to everyone. But it seems that if you negotiate you can get somewhere around half of prime, to prime less 11%. The key to getting a favourable rate depends on how you negotiate with your bank manager, your academic results to date, and having a strong guarantor to back you. Most of the banks put aside a set amount for student loans, so the earlier you apply for yours the better. Standard Bank has listed all the documentation it requires in order to process a loan application: latest academic results; ID book; certificate of registration with the university (if funds are required to pay for registration then the student must have a certificate of acceptance with proof of registration to follow); postal address while studying; salary details of part-time students; and if married, details of the spouse and a copy of the marriage certificate. The guarantor must also supply a range of documents relating to banking details, employment, income and marital status. Top of page | Home Page | News | BT Money | Survey | Companies | People | Appointments | World | Markets | Trends | Columns | News Maker | Calculators | Search | Archive | E-Mail us |