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Be wise to the real cost of your educational loan


Your study loan instalments may be manageable, but are you aware of your total cost of study, or even what interest rate you are paying? Too often, cash-strapped students opt for low payment options with high interest rates, without taking into account their working years, or the repurcussions on their careers.

Johan Wasserfall, CEO of Eduloan, South Africa’s dedicated educational financial services provider, attributes this ‘ostrich-in-the-sand’ approach to people feeling intimidated by financial matters and markets, and therefore not informing themselves properly about credit.

The reality is that by scrutinising the additional costs involved in one’s education, in the long-term it’s possible to eliminate thousands in debt.

Students looking at education loan options will usually go for the option with the lowest monthly repayment and longest repayment option, often without fully taking into account the long-term effects of this debt.

Wasserfall cites an example: “With interest and other charges included, that student may land up taking three times the amount of time to pay the loan off and, with interest and other charges, pay a substantial amount more than the original loan amount.

“Or a student may obtain funding for only the first year of study and find themselves needing more funding for year two, often with the first year’s repayments and interest not yet completely paid off.”

Another factor that students neglect to take into account is all the ‘hidden’ costs that are involved, such as textbooks and study materials, accommodation, transport, food and entertainment funds.

Often, it is easier than people think to get tangled in a downward debt-spiral that may well cost a good student his or her education at the end of the day.

Says Wasserfall: “South Africa’s university dropout rate has reached alarming proportions in recent years. The Human Sciences Research Council’s recent study of about 34,000 students showed that of this amount, only 14,000 students graduated, with some 20,000 dropping out of their courses - most of them being either in their first year or midway through their second year of study.

And the reason topping the dropout list? Pure lack of finances and badly managed finances.”

Students will also often approach a bank for a loan, and be swayed by the fact that they only need to start paying the loan back after they complete their education.

Wasserfall cautions: “With a bank loan, while a student may think it seems like a good idea to just study and not worry about the money, many students start their working life under a huge dark cloud of debt that may take up to seven years to pay back, even though they only studied for three or four years.”

He advises that many students are not even aware of other options – such as those offered by Eduloan – like paying your loan back in reasonable increments while you are studying so that you can start your working life with a clean slate and clear mind.

Wasserfall stresses the benefits of obtaining one’s educational loan through a company such as Eduloan, as they focus solely on educational finance, are aligned to the lending criteria of the National Credit Act and are aware of the real costs involved in education and the best options involved for paying back these costs.



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