Education is increasingly becoming an expensive concept, even for those born with the proverbial “silver spoon”!
Education is considered a fundamental birth right of children according to the Constitution or Charter of several nations and while free education is accessible in certain regions of the world up to a basic level, higher education is not within the reach of millions of students around the world. .
Student funds or student loans offered by banking and financial institutions have so far provided the means for many students from developed countries to pursue their dreams of a coveted education. In recent years, cooperative and microfinance societies are extending these facilities to students from poorer or developing countries, thus giving them the means to meet their academic qualifications and pursue a career of their choice.
The basic premise of this type of loan is financial aid for books and study materials, tuition fees and living expenses. The terms of student loans differ greatly from other types of loans, for one thing, interest rates are much lower and loan terms are extended; Second, the payment schedule is usually deferred until the student completes their education and finds a means of employment to pay off the loan.
The International Scene
In Australia, students are funded through the HECS-HELP (Higher Education Loan Program) scheme. This financing is repaid over a scheduled period of time through a supplemental tax program, based on a sliding scale of taxable income.
In the UK, education loans are the primary responsibility of the state-owned Student Loans Company. Under this scheme, interest is calculated on the principal amount of the loan from the moment of receipt; however, reimbursement begins in the fiscal or financial year of the student’s completion of the course. The financing package or student loan includes the tuition fee and the maintenance grant.
There are two types of educational loans in the United States; private student loans and federal loans from the federal government. In some cases, student loans may be offered as a financial aid package that could cover grants, scholarships, and work-study programs. Federal loans make up the vast majority of student loans and are classified into ‘subsidized’ and ‘unsubsidized’ tranches. Subsidized loans are interest-free for the duration of the student’s course of study.
Federal student loans are much less expensive compared to private student loans and can be repaid using the income-driven repayment plan, where the loan amount is repaid based on how much the student earns and not the actual amount owed . This option, however, does not apply to private student loans.
Most colleges and universities in the US are covered by the federal student loan program. It is not uncommon for colleges and universities to have their own loan assistance departments and financial advisors who can meet with students and offer expert advice on the type of loan and repayment option to make.
