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A weak economy puts student loans at risk…..

Recently I came across a very disillusioned sponsor of a student loan who had been paying interest and service charges for 18 months and the outstanding loan was still the same as the original amount.

The banks cover themselves from left right and center with this type of loan. Whilst it is the only way many students can afford to pay for their education the loan is loaded in favour of the bank all the way. The risk is all yours.

You take the loan for the duration of your studies and reapply on an annual basis providing the bank with your marks annually when you reapply. You elect a sponsor on application who commits to paying the interest and service charges from the beginning of the loan until you finish your studies. This means that the original amount of the loan is still owed when you finish.

This is no loss to the bank as the cost of borrowing has been paid for and some….as the current rate of interest is 20,5%!!!!

You will be granted a grace period for capital repayments after you have completed your studies and have not found employment. The grace period may be extended if you have to complete your articles, internship or community service.

The reality for many students is that there is a huge risk of not being able to find employment after completing your studies. The local and global economy is under huge stress and growth is not happening. This translates into rising unemployment which has a large component of youth.

Starting off in your career with a huge high interest bearing debt is not ideal especially if you cannot find a job to pay it off. The banks have it covered by either you or your sponsor. A huge obligation on you in the face of tough times ahead.

Listen to the audio below for more information

Read more from Paul Roelofse at www.investforlife.co.za

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