What are your student loan options?

Being a student can be difficult. Not only do you have stacks of uni work to get through in short periods of time, but you also have to keep on top of your finances.

So what are your options if you require a study loan? And furthermore, what are student loans? Well, they are essentially a personal loan that can help you be more financially comfortable when studying.

But you have to be aware of interest rates, fees and repayment options, as well as borrowing within your means. Let’s take a look at what a student loan is and what options students have in Australia.

Personal loans: what are they & are they right for you?

A personal loan is not unlike other financial loans, where you borrow a certain amount of money and pay it back with interest in weekly, fortnightly or monthly increments. Typically, personal loans can either be “unsecured” or “secured”, this regards whether you need to offer an asset as collateral. Collateral is an item with value that you put forward to secure repaying your loan. The personal loan provider can claim your collateral asset if you are unable to repay the loan you were provided.

If you secure a loan without putting an asset up as collateral, like your home or car, this is what is called an “unsecured” loan. These personal loans are of greater risk for the lender to provide and typically come with higher interest rates as a result.

What are student loans?

Australia has a student loans program that is typically reserved for domestic students. The system, called the Higher Education Loan Program (HELP), allows eligible students to have their tuition costs covered upfront. Students commence repayments on this loan when their wages reach a particular amount, and this loan cannot cover extra costs such as books and other course materials that you may need at uni or for home study.

But there is a limit for how much a student can borrow, being around $108,232 for most students and $155,448 for students enrolled in dentistry, medicine, vet sciences or eligible aviation courses. The Australian Government also adds a 25% loan fee for each commenced unit of undergraduate study that utilises the FEE-HELP scheme, but this will be reduced to 20% from 1 July, 2021.  

If students need extra financial assistance outside of the Government loan system, they can inquire about receiving a loan from a recognised financial institution. Students typically own fewer assets than professionals, so these personal loans are usually for smaller amounts and often come with higher interest rates than the collateral-guaranteed secured loan. The higher interest rates are used to cover the extra risk taken on by the lender for students with fewer assets and lower incomes.

What loans can domestic students apply for?

There are different loans domestic students (citizens and permanent residents) can apply for in Australia. A student’s eligibility criteria can differ depending on which lender they apply for a loan from. Usually, students have to be at least 18 years of age unless they have a guarantor who can help them with securing the loan.

Other factors depend on the lender, but could include things like your credit history and current income. It might be a good idea to look into different options to understand the impact these factors may have on your interest rate and fees. Furthermore, it will help you understand if you can meet your repayments before committing to the loan.