Sanlam : Tackling the Affordability of Education

While parents are encouraged to start saving for their children's education from an early age, the reality remains that many are unable to save enough for tertiary education as the cost of basic education is also rising ahead of general consumer inflation (CPI). If a child cannot obtain a bursary, a student loan is often the next option to explore. Van Heerde, however, cautions parents to take a moment to understand what loan will best suit their pockets:

Bank Student Loans

Bank loans require parents or other principal debtors to sign surety and to pay the interest portion of the loan on a month-to-month basis while the student is studying. Following graduation the student is required to repay the loan through monthly instalments. Banks usually provide a grace period for capital repayments to students who have to complete articles, internship or community service. However, most banks require immediate repayment of their loans where students fail to complete their studies.

The interest rates vary depending on the loan amount and the risk profile of the person who signed surety. Students who do not have a principal debtor with a good credit record to sign surety can take out a student loan in their own names if they have regular income. However, some banks require students who work part-time to start repaying the loan as soon as they start studying.

National Students Financial Aid Scheme

The scheme also offers loans that need to be repaid. A portion of the loan amount may be converted to a bursary for qualifying students. Previously, only students from households with an income of less than R122 00 a year qualified for NSFAS loans. However, from 2017 the scheme has extended its support to the 'missing' middle - the lower middle class households whose annual income exceeds this threshold but don't have the means to put their children through tertiary education institutions. Students can qualify for varying amounts up to the maximum of R71 800 a year. NSFAS loans only need to be repaid when the student has finished studying and found employment.

Van Heerde says the recent impasses at universities bear testimony to frustrations about the escalating cost of tertiary education and thus the need for parents to start saving as much as they can, even if it is just to top up on the funding that is provided by a student loan. 'Even if you may end up going the student loan route for tuition fees, there are other expenses like accommodation, books and meals that you may be able to cover with your savings.'