As the cost of living continues to rise, a number of South African banks are beginning to see a dramatic increase in the amount of students requesting loans to cover their tuition fees.
Inflation and the current cost of living crisis have been a major contributors in the increase in demand for student loans. Students and their parents are just unable to afford these high tuition costs, as well as the other expenses such as accommodation, study materials and living costs, that go hand in hand with attending a tertiary institution.
Along with inflation, the cost of tertiary education in the country has also skyrocketed. According to data from OldMutual, the average cost of sending a student to university is approximately R55,900 in 2023. By 2030, his number is expected to rise to just under R100,000.
Various banks, including First National Bank (FNB), have reportedly been disbursing more student loans than usual. FNB reports that in the last six months of 2022 alone, they disbursed almost R40 million in loans to students wanting to further their education. This is a 140% increase from the corresponding period in the previous year.
A number of factors are examined before granting a student a loan, including:
- Their credit profile – whether or not the client has experience paying off previous debt.
- Affordability – whether or not the client will be able to pay back the loan in addition to their other expenses.
These criteria are critically examined before a student can be granted alone, as the rising interest rate also needs to be considered.
FNB states that the interest rate for student loans is significantly lower, encouraging students to use the money to fund their studies and not to improve their lifestyle. Students who pay off their loans early will face zero penalty fees.
Student loans can be a great option for students who do not have another way of funding their studies. Not only are the interest rates lower, but they cover the costs of more than just tuition. Students will typically also only be required to pay back their loan once they have completed their studies and the application process is relatively simple.
