Struggling to pay the bills? Five tips on how to manage your money while you study.

You’re off to university or college this year, and your mind is buzzing with thoughts of your studies, making lifelong friends and getting to know a new city. 

It shouldn’t be all work and no play, but having a decent social life comes at a cost. Managing your personal finances doesn’t have to be complicated nor impossible, even if you’re just starting out. You just have to know how it works.

When you become a full-time student you receive new sources of income (loans, grants and bursaries) as well as have new costs for essential living  study fees and  entertainment. Now that you’re on your own, you might be tempted to spend money on all the things your parents wouldn’t let you have before. Go slow. If you play it smart, you can avoid the sort of money troubles that plague many young adults.

Here are some essential tips on making it in varsity without breaking the bank:
 
1. Don’t just sign up for a random bank, offering seemingly great deals. Do some research into student loans to find out which financial service provider will offer you the best options. 

2. Don’t get a credit card unless you absolutely need one. If you have a relative or a bursary provider who has allocated funds to you for accommodation, food, books and other living expenses, consider getting an Eduxtras card from Eduloan – it doesn’t cost you anything and the funds are allocated into different “pockets” for different types of expenses. This way, you get to manage your funds wisely and you won’t be able to overspend. 

3. Avoid non-academic debt. It might seem like a good idea to put clothing or food on account with a store card, but it’s not. Focus on developing good money skills with cash. Worry about credit later. 

4. Save and then splurge. If you decide you must have that TV or sound system, then save for it. Wait until you can pay cash. 

5. Pay your bills on time. Basic advice, but it’s surprising how many people lose track of things. If you pay your bills as they arrive, you won’t have to worry about forgetting them.

Taking control of your finances during your studies and taking the time to think about your spending can make a real difference to your financial situation.

What are the right questions to ask when applying for a student loan?

Many of us will need to borrow money from time to time - and some of this may be needed to help finance our studies. The world of credit can be a scary and misleading journey.

There are several factors to consider when borrowing money. Most of us only consider the monthly instalments when taking out a loan but the interest rate and repayment term have a far bigger impact on our bank accounts than we realise.

Here are some guidelines to aid you in understanding how financing works:

When you borrow money the bank will give you on option on terms, and will charge you interest.

The term is the period you have in which to pay back the money. The interest rate is the cost of borrowing money, and on short-term loans is typically expressed as an annual percentage. Despite this, it is often calculated monthly or even daily. Both the term and the interest rate help to determine the size of your monthly repayment, and the amount of time you'll spend in debt.

SHOP AROUND

With a higher interest rate, your monthly payments will increase. If you borrow R10 000, for 12 months at 9% interest, your monthly instalment will be R874.51. But if you borrow the same amount of money, also for 12 months, at 11% interest, you can expect to pay R883.82. These differences seem incremental but consider that this variance is accentuated for larger amounts, and longer time frames.

COMPOUND INTEREST

Compound interest adds a further complication, and applies to most situations when we borrow money. This is interest on interest. It is when the interest of a sum of money is added to the principal, and then bears interest. It occurs when the interest we owe is added to the sum of money we borrowed (principal amount) and itself earns interest.

LONG-TERM COMMITMENTS

We also have to think about the term of the loan. If you have a longer term, your monthly payments may be lower, but will end up paying more money over time, based on the interest being charged over a longer period. It's better to borrow money over a shorter term, and to get the lowest interest rate one can.

Paying off debt affects your ability to save money and achieve financial goals such as buying a vehicle, a house or travelling overseas, so you should always aim to pay back loans as soon as you can. If you default on a loan, it will be harder for you to get credit in the future.

SOME MUST-ASK QUESTIONS BEFORE TAKING A STUDY LOAN

1. What will my monthly instalments be?
2. How long will the repayment period be in years or months?
3. How much is the interest and how is it calculated?
4. Is the interest rate competitive – could I get a cheaper rate elsewhere?
5. Will you be charging compound interest?
6. How much will I be paying by the time I graduate and start working?
7. If the interest rate goes up by 1%, how much more will I have to pay monthly?
8. Do I have to take compulsory life insurance with the loan?
9. What will happen if I can’t pay the loan back?

When it comes to borrowing money, student loans are the cheapest option compared with commercial loans or short-term credit solutions.

Eduloan offers education financing, cost associated with starting the loan and monthly service fees at very competitive interest rates. A key advantage with 
Eduloan is that we offer pay-as-go study loans at an affordable interest rate. This means you get to repay your loan as you study leaving you debt free on completion of your course.

Your 24-hour adventure starts now!

At Eduloan, we know that the choices you’ll make today will affect your tomorrows in ways that you sometimes only realise later.

That’s why we’re committed to enabling you to follow your dreams today instead of delaying them due to your financial circumstances.

Play the 24-Hour Adventure game with Eduloan and stand the chance to win your share of R15 000 worth of airtime, Pick n’ Pay vouchers or books for your studies from Van Schaik!

The concept is simple… you are in a game where the player is placed in a “day in the life” situation of a normal varsity student who has to make certain choices based on the situation presented. You’ll soon realise just how important it is to make the right choices to get the desired outcome.

The competition will run from 7 January to 17 February 2013 and we’ll be giving away prizes every week – click here to start playing on Facebook or here to play from your phone. Good luck!

Register for studies now to achieve your career goals

Many New Year resolutions focus on jobs, careers and money – and the education and training we need to get ahead. And for good reason: we spend a lot of our lives at work, so it is important to spend time thinking about the ways to improve our working life.

 

Time is fast running out for any chance of last-minute registrations. Students who register early have the best chance of getting the courses and classes they want.

Last year saw a drive by the Minister of Higher Education to encourage students to register early with the institutions of their choice to avoid repeats of the 2012 stampede and chaos caused by late registrations, so you may find that many universities have closed applications already and have put a halt to walk-in registrations altogether.

Here are some quick links for information on applications to the major universities in South Africa:

UNISA

University of Johannesburg

University of Pretoria

University of Cape Town

University of Kwa-Zulu Natal

Stellenbosch University

Rhodes University

University of the Witwatersrand

University of the Western Cape

University of the Free State

University of Venda

University of Limpopo

Tshwane University of Technology

Durban University of Technology

Cape Peninsula University of Technology

If you’ve missed the deadlines for your university of choice, you may have to either wait until the next registration cycle (some of which can start as early as April this year) or look at other options such as FET colleges, technikons or distance learning institutions.

If you’d like to speak to a customer service representative at Eduloan about study finance, give us a call on 0860 44 55 55 or visit www.eduloan.co.za for more information.

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Keeping South Africa’s students debt-free

Parents want their children to do well in school so that they can go out into the professional world and become successful, but finding the money to fund the ever-increasing school fees and then even more expensive tertiary education fees is sometimes completely out of some parents’ reach.

Cash-strapped parents are often forced to leave the financial responsibilities of paying for university or college education to their children. After all, they have to take responsibility for themselves at some point. But many South Africans do not realise the burden of the debt they are putting on themselves by taking a long-term, deferred student loan, whereby students pay interest on the loan while studying and start paying off the capital amount when they start working.

According to the most recent figures released by Higher Education South Africa (HESA) - students in the country are in arrears of more than R2,8 billion with universities alone. 

A legacy of debt

Student loans were initially perceived as a vehicle to drive access to higher education for poor or previously disadvantaged students. The intention was to give youth the opportunity to have higher lifetime incomes as a result of their education.

Instead this system has given birth to a generation of debt-ridden, unemployed young people, held captive by insurmountable debts before their careers have even begun.

One of the main contributing factors to the student dropout rate is the lack of understanding about additional costs associated with higher education. Even for those who are fortunate enough to receive a bursary, student financial aid is typically limited to covering tuition fees alone.

Students who had hoped to pursue their dreams are waking up to the shocking reality of extra expenses incurred from textbooks, transport, food, accommodation and other living costs. This lack of preparation for the associated costs is forcing many students to drop out. The situation is compounded further when unqualified students can’t find work, which means they become incapable of repaying their massive debts.

Short-term loans a better option

Most student loans can take between five to ten years to pay off, as the student pays only the monthly interest on the loan until they start working. This means that many students are stuck in a vicious cycle of paying off compound interest, which is interest accrued on top of interest that has been added to the principal loan amount.

Newly-employed graduates also have differing rates of income, and some find it increasingly difficult to pay off their student loans and make ends meet over the first few years.  A student loan can be almost as big a commitment as buying a car or house, and may hinder the ability of the graduate to get loans for either of those items.

This is the reason why Eduloan believes in providing short-term loans, which can be paid by an employed sponsor (who could be a parent, a relative or a friend). The interest rate is lower because the repayment period is shorter. That means that by the time the student has finished studying, their loan will either be paid off in full or nearly paid off, which gives them the freedom to start making the money they deserve to make, as soon as they graduate.

A key differentiator between Eduloan's study loans and those offered by other financial institutions is the interest rate. Eduloan offers loans at a very competitive interest rate, payable over shorter periods of time.

If you’d like to find out more about how our loan applications work, give us a call on 0860 44 55 55 or visit www.eduloan.co.za.