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Student Loans

For many parents, sending their child to university can be financially draining – especially when the country’s economic state is already restricting earning enough for basic needs.

In Australia, the government provides loans for tertiary education by way of the HECS-HELP scheme – but this doesn’t cover many of the expenses that students face. There are still many things to pay for including textbooks, equipment, stationery, travel, accommodation and living expenses, and so on.

If you need assistance for financing your tertiary studies, you may consider applying for loans with the Australian banks or other lending institutions. Loans are offered to students who are Australian residents entering college or university.

To apply for a loan, you should generally have parental backing or guarantee. This is often required by most lenders (especially if you are not yet 18) and may mean your loan will have lower interest rates because you are effectively pledging your parents ability to make the repayments as collateral against your loan.

Loans approved by banks or other lending firms are generally worked out in such a way that you have the repayment flexibility options –

  • Pay the borrowed money after finishing your studies, but with capitalised interest for the loan duration, or
  • Make regular repayments on the borrowed money for those that can afford to do so (usually on a weekly, fortnightly or monthly basis).

The first option is often not fully explained by the lender, and you get the surprise of your life when the time comes for you to repay the loan – not aware that interest charges have accumulated for the entire loan term. This is because as the interest is charged on the loan it is added to the amount outstanding. Then, the next amount of interest is calculated on the new amount outstanding which includes the previous amounts of interest (which is how capitalisation works). So, if you finish your degree in five years and only then start repayment of your loan, it means that the interest amounts for the entire five years have been added to your balance and interest has been charged on those amounts as well.

The second option offers a better deal, but only if you have a source of income where your repayment money will come from.