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Student Loans: What are They and How to Get One?
Before getting your high school diploma, you've no doubt thought about your college plans and started looking into the different opportunities available to you depending on your qualifications and aspirations for further studies.
Higher education, be it public or private, comes at a hefty price tag that includes financing a year of tuition and accommodation throughout the duration of coursework. It is estimated that a non-grantee student spends an average of €1200 every month just to make ends meet - much more if they're attending private schools. For many future students, such expenses can be quite off-putting and make them reconsider their ambitions. In addition to public funding, student loans can prove to be a valuable source of help in such cases. There are various types available, tailored to suit your needs, which can be acquired from any bank based on your personal situation.
Studapart Gives the Lowdown on Different Student Loans and How to Get One.
What is a Student Loan?
A student loan is a sum of money borrowed on credit from a bank, under certain conditions, for the purpose of financing higher education. Generally, it is granted to adults over 18 and under 30 years old. It has in particular that its interest rate is often very low: the amount to be paid in addition to the repayment amount will be lower compared to another type of bank loan, such as consumer credits for example.
It is also a capital whose repayment is deferred and can spread over a period of 5 to 10 years, that is to say, that one begins to repay it at the end of his studies, when one begins to work and therefore earns a salary. There are several types of student loans:
The student loan guaranteed by the State
The State-guaranteed student loan was created for French and members of the European Economic Area (EEA) who wish to continue their studies after obtaining their baccalaureate. To benefit from it, you must:
- be enrolled in a higher education institution in France,
- be of legal age,
- be under 28 years old,
- have French nationality or that of a member state of the EEA.
If you are eligible, you can request a loan guaranteed by the State from the partner banks. The capital of this loan is capped and you will have to repay it with interest, but you can do so from the end of your studies, regardless of their duration.
This type of loan allows you to borrow money on credit to finance your studies without having to provide a guarantor or proof of income. It is the State that acts as a guarantor for you with the bank, which represents the assurance of being reimbursed for the latter. Its guarantee will be up to 70% of your loan amount, only if the bank does not manage to recover its debt within the agreed period. The number of State-guaranteed student loans granted each year is however limited.
Bank Student Loan
Most banks offer student credit offers. You can take out a loan with the bank of your choice by providing proof of your situation with a student card or academic certificate. This type of loan is usually subject to the age of the borrower, usually reserved for people over 18 and under 30 years old.
Finally, ask a family member or another close person to be a guarantor, banks require a guarantor to ensure repayment of the borrowed amounts.
The zero-interest student loan?
The zero-interest student loan is a type of loan that does not require repayment of interest. It is very attractive to students, since only the amount of the loan borrowed is due to the bank. It is granted in light of the student's situation and most of the time in specific cases:
- need for specific materials,
- passing license for continuing studies,
- funding for housing,
- etc.
The amount you can borrow at zero-interest is fairly low. Banks usually offer loans of 1000 to 1500 euros. Also, the repayment will not be deferred until the end of your studies like other loans, you will have to start repaying it as soon as it is taken out.
How to get a student loan?
To get a student loan, you will have to go to a bank. You can ask for it from your usual bank, but you are not obliged to do so if, for example, you find a more attractive offer from a competitor. In order to meet the requirements, you must:
- Be of French nationality or have lived in France for more than 5 years;
- Be of legal age and less than 30 years old (except for exceptional cases which can be justified);
- Attest to your student status with a school certificate or student card.
The bank will also ask you to choose a guarantor, i.e. one of your relatives must act as a surety by showing proof of their income in order to be able to reimburse the loan on your behalf if you are unable to do so. This is not the case for the student loan guaranteed by the state, for which it is the guarantor.
Most banks offer an online simulation to give you a precise idea of the amount you can borrow and the amounts you will have to repay.
How Does a Student Loan Work?
After signing your student loan contract with your bank, the amount of your loan will be paid to you, usually on a specific account from which you can transfer money to your current account in order to pay your tuition fees. You can use this money at your convenience until the balance is exhausted. The peculiarity of the student loan is that its repayment is deferred. That is, payment of your debt begins at the end of your studies, or when you are able to work. The date on which you must begin payments will have been decided with your bank at the signing of the contract, as well as the amount of your monthly payment. This will be debited from your account every month until full repayment of the borrowed amount.
Traditional student loans are granted with an interest rate, which means you have to pay a certain amount, equal to a percentage of the amount of your loan, in addition to your repayment. This is not the case for zero interest loans.
How to Repay a Student Loan?
Student loan repayment begins at the end of your studies in the hope that you are on the job market and able to earn a salary to pay off your debt. However, it is possible for you to repay interest during your studies.
At the due date, an amount predetermined with your bank will be debited from your account each month until full repayment of the amount of your student loan.
What are the Risks of a Student Loan?
When borrowing money, you agree to pay it back. It is important to ask if it is worth the risk and effort. It is important to carefully calculate the amount you borrow as well as any expenses related to your loan. The main risk is that you are unable to repay your debt by the due date.
