Studying after school ain’t cheap. Ever wondered if a tertiary qualification is actually worth the debt? Let’s weigh up the pros and cons of taking out a student loan before you dive into debt.
Getting into any kind of debt is not something that should be taken lightly, and should only be done after careful consideration and research. Student loans can exceed R400 000 for a four year degree. This will all have to be paid back.
What is a Student Loan?
A student loan is a loan taken out to fund tertiary studies. Typically, a student and his/her parent/guardian take out the loan. In general, the parent/guardian agrees to pay back the interest on a monthly basis. After the student has completed his or her studies, the capital amount is paid back by the student. The bank (or other loan issuer) usually gives the student 3-6 months after graduating to find a job, and start paying the monthly installments. If, however, the 3-6 month grace period goes by without the graduate finding a job, the parent/guardian is expected to cover the repayments.
Is it Worth it?
Statistics have shown that tertiary institution graduates earn significantly higher salaries than those without a tertiary qualification, on average. While it is not usually a good idea to start your adult life in debt, this type of debt is an investment for your future. If a student loan will enable you to study further when you would not be able to otherwise, then it is (generally) worth it. That being said, there are more things than average earning potential to consider. Here are some questions to ask yourself before taking out a student loan:
Is there no other way of funding my studies?
Loans are serious commitments and they can greatly affect your future life. Look at all other options (like borrowing money from friends or family) before committing to a loan. Also search and apply for bursaries and scholarships. EduFunding has a comprehensive listing of funding opportunities available in South Africa so you might find just what you are looking for there.
Does my intended career require a tertiary qualification?
Many jobs will offer on-the-job training. For example, training to become a police officer or fireman. On the other hand, becoming an accountant or engineer will mean you need tertiary education. If you intend on pursuing a career that does not require a qualification, then a student loan is an enormous, unnecessary expense.
What is the minimum amount of money I need to borrow to fund my studies?
Make sure you clearly define exactly how much money you will need to cover your tuition and living expenses. Then borrow no more than that. It is easy to overestimate how much money you actually need, so compile a comprehensive budget to find out the exact amount you need to borrow.
Can I work while I study?
If your studies are part time, or not high intensity, it is certainly worth it to get a part time job. The additional income may cover expenses like food, accommodation or even more than that. This means you need to borrow less money from the bank. Every effort should be made to reduce the size of loan you intend to take out (as long as those efforts do not compromise your studies).
Alternatives to Student Loans
If you are unable to get a student loan, or would prefer not to, there are a few alternatives:
Delay your studies until you have the money
Instead of studying straight out of high school, take a gap year (or years) to work and save money to pay for your studies yourself. Be wary of this though. After a few years out of the studying environment, it can be very difficult to get back into the studying mentality.
Do online courses
There are many available online programs to study a large variety of subjects. These courses are usually far cheaper to complete than university degrees and diplomas. Courses in programming, for example, could translate into a decent salary after completing them. Additionally, you are not under the same time pressure since you can choose when to start the course. This could give you the option to work until you can pay for each course. Remember that to do online courses, you will need access to a computer and reliable internet connection.
Apply to many bursary programmes
There are more bursaries available in South Africa than many people seem to think. You will need to have a solid academic record. However, a 95% average in high school is not a requirement when applying for these bursaries.
Student loans are worth it IF there are no other options or it’s the best option you have (given tertiary education is a necessity for your chosen future career). It is important to remember that those who have a tertiary qualification do tend to earn more money and have greater potential to benefit from salary increases as they gain experience.
If you do decide to take a student loan, it is important to manage your finances well. The money from a student loan is deposited into your account all at once. Do not fall into the temptation of spending the money on things other than tuition and essential living expenses. Stick to your budget!