Higher education is expensive and requires the preparation of a substantial budget. Between tuition fees, the purchase of computer equipment, transportation costs and rent, charges follow one another throughout the course.
And all these charges, the student must take care of them. To cover all these costs, the financial subsidies of the State and the parental contributions are not always enough to get out of it. Fortunately, there is a solution: as soon as you reach the age of 18, you have the opportunity to aspire to student loans. This is a consumer credit at a suitable rate that can help you finance your education.
As a general rule, subscribing to this type of credit for students does not require any proof of expenses. However, there are some things to know before you take out a student loan.
The specificities of student credit
The student loan is a consumer credit presented by banking organizations to young people aged 18 to 28 or 30 years. In order to benefit from it, the applicant must obligatorily pursue studies within an institute of higher education (grandes écoles, university, IUT, BTS). Registration must be attested. In some cases, banks may apply for a parental or third-party guarantee and a disability death insurance policy.
The amount of the loan is different from one bank to another, depending on the deposit and income of the student. It generally ranges from 1,000 to 45,000 USD, for a duration that can last on average between 2 and 10 years. Compared to a traditional consumer loan, the student loan benefits from a preferential rate: the annual percentage rate of charge or APR. It ranges from 0.90% to 1.50%.
The student loan is a deferred credit. This means that you can begin paying your credit after graduation, and not before that date. Generally, the refund is supposed to begin after the end of studies, when the outgoing student gets his first job.
How much to borrow?
Many students think that you have to borrow the maximum amount. It can be a good idea. Nevertheless, it is recommended to evaluate the amount that truly corresponds to your needs. Yes, you will have your credit, but you must also keep in mind that you will have to pay it back. You must therefore take into account your ability to repay once you graduate.
Criteria to consider when negotiating a student loan
Loan conditions vary from bank to bank. It also depends on the conditions of the student. Here are some things to consider when negotiating a student loan:
- Call rates and amounts proposed. This information will serve as a basis for you to compete. You can also use an online comparator.
- Loyalty: You are likely to get preferential terms from your parent’s bank if they are good clients. In the event of incidents (eg frequent uncovered), it is better to turn to other establishments.
- Relationships: It is important to present a serious person for the bond. You can choose the bank of your guarantor if he is a good customer.
- The professional project: a bank will surely favor the most coherent projects. Remember to tie yours and show your motivation by presenting it.
How to obtain a student loan?
It is a loan reserved for students from 18 to 30 years maximum. In general, from the age of 27, it is very difficult to get a student loan. In order to prove your student status, you must necessarily attend a higher education institution or possess a student card. Other elements can be added to these criteria of accessibility to student credit: duration of your studies, deposit, income… Each organization has the right to establish specific eligibility conditions.
When you submit a student credit application to a bank, you must complete a file with your valid ID, student ID or proof of education. A proof of address may also be requested in case you do not have the same address as the person who stands surety.
For the deposit, a valid identity document is also essential, as well as a proof of address: a receipt of rent of less than 3 months, a bill of gas, fixed telephone or electricity of less 3 months. A certificate of income is also useful: last payslips, pension statement or tax notice. Additional documents may be required depending on your borrower profile.
Is it possible to take out a student loan without a deposit?
For students from low-income families, having a guarantor with the required income level is sometimes impossible. If you do not have a deposit, an alternative is possible: the state guarantee.
In order to qualify for this assistance, the following conditions must be fulfilled:
- be under 28
- to be enrolled at a French higher education institute
- to be French citizen of a country of the European Economic Area.
For this type of contract, Bpifrance is responsible for paying your monthly payments when you are unable to do so. However, the credit amount must not exceed $ 15,000, the minimum repayment term is 2 years and the State only covers 70%. The interest rate is freely set by the bank that provides you the loan.
It should be noted that only a few banks are authorized to offer this type of loan. Some banks limit the number of government-guaranteed loans they make each year. If a bank feels that you do not have the capacity to repay your debt, even with the help of the state, it can deny you the loan.
Unlocking funds: what options?
When you have a loan, the bank can offer a progressive release of funds. In this case, you do not receive the entire sum at once, but on several occasions, for example in monthly installments.
This approach is a safeguard and allows the student to manage his budget more easily. This is a paid option, but the cost is not high, it is usually limited to fifteen USD.
How to repay the student loan?
There are 3 ways to repay the student loan:
- Refund with deductible (deferred phase ranging from 2 to 6 years)
It offers two options: total deductible and partial deductible. In the first case, you pay nothing (or only insurance premiums) during your studies. In the second case, you start paying interest and insurance as soon as you get the credit, but do not start paying back the capital until after the studies. It is generally preferable to adopt the partial deductible to reduce the amount of interest.
- The immediate refund :
If the student does not wish to benefit from a franchise period, he can opt for immediate reimbursement. He must then begin the repayment of the credit as of the month following the release of the funds. This, through monthly payments relating to capital, interest and insurance. Note, however, that the amount of repayments can not exceed 30% of the estimated future income.
- Early repayment:
For students with a large influx of money, know that the student loan is part of consumer credit. So you can take advantage of the “Scrivener” law. This indicates that it is possible to make an early repayment (total or partial) without paying any compensation on the capital that remains to be repaid. If you wish to benefit from this law, a clause concerning the early repayment must be clearly stipulated in your credit agreement.
Alternatives to the student loan
Young people under the age of 30 can take out other loans to finance their registration fees, the necessary purchases for the re-entry or the obtaining of a driving license. The zero-rate student loan provides interest-free credit, but the amount remains low. Generally, it does not exceed $ 2,000. These are offers with very specific titles, such as “advance entry”, “permit $ 1 per day” or “advance on CROUS stock exchange”.
Other consumer credits can be obtained without obligation to be a student. Banks usually offer less than $ 10,000 for a relatively short repayment period (around 36 months).