A lot of people are genuinely confused about how to differentiate good and bad debt. We’re going to be breaking down these different forms of debt throughout this week and covering the grey areas as well. This article will focus on the first ‘good debt’: student loans.
Student loans are generally classified as good debt. One aims to obtain a qualification hoping that it will allow you to get a job that will, in the long run, not only pay the loan and interest back, but also improve their quality of life. The likelihood of finding employment is much higher if you have a tertiary qualification. You also hope that having a degree coupled with work experience will ensure a swift rise up the corporate ladder both in terms of responsibility, position and salary.
While we do hope that the above comes to pass, and smoothly so, life doesn’t always follow what we plan on paper. Having a post-matric qualification is no guarantee that you will find work. The economy may not be in your favour, and things could be especially difficult if there is a shortage of jobs in the field you are qualified in. You may have to compromise in terms of what job you take in order to keep up with payments. Another obstacle may be a meagre entry level salary (think internships that pay R2,000 a month and require you to have your own vehicle) or consider relocating. Certain industries thrive in certain cities and relocation is necessary if you want to make a living doing what you’ve studied for.
What are the alternatives?
There are other alternatives to getting a student loan, and we suggest you have a look at these before heading to the nearest bank.
- Bursaries and/or Scholarships: You can apply for a bursary or scholarship to fund your studies instead of getting into debt. Of course, this requires lots of research and you need to make sure you qualify for the bursary before you apply. Apply to as many places as possible and make sure you’ve filled in all the relevant forms and they are send at least 2 weeks before closing date (the South African Postal service is not exactly reliable, so better safe than sorry). Always keep an extra copy of your applications and follow up with each institution to make sure they have received your forms. If you can, try using registered mail so you can track your post. Make note of any contractual obligations you may have to particular schemes and pay close attention to what the bursary or scholarship covers so that you don’t find yourself in a mess. If you’re not sure where to begin, click here for a list of bursaries available in South Africa.
- Your employer: If you are already employed and want to advance your career, speak to your employer about funding your studies without the burden of interest. There will probably be certain terms and conditions attached to the loan (e.g. you may be contractually bound to your employer for a certain period of time). Discuss this with your line manager or HR manager and see what terms you are able to negotiate.
- Taking on a side hustle or part-time job: This will be particularly difficult if you’re already swamped with work and trying to juggle school work with another job – but it isn’t impossible. If you’re a full-time student, fresh out of high school, a waitressing job could help a great deal. Tips can not only feed you, but depending on how you work, they can pay your fees, buy you text books and clothes. You can also try a job in a clothing or book store. If you have access to the internet, there are some online opportunities you can look at to make extra money on the side.
Education in South Africa is expensive and getting into debt adds to the burden. We encourage you to exhaust any and every other possible solution before heading into a loan agreement where you will be charged a ridiculous amount in interest.
Do you have any tips on how to raise funds to further your study? Please let us know in the comments field below, you never know who might need your help.