In light of the recent economic developments, as well as the state of government funding for student, advisors will do well to ensure their clients are making adequate provision for the education of their children.
Education is not a luxury in today’s competitive job market. Unfortunately, South Africans are still struggling to make ends meet and for many students now writing Matric exams, there is no certainty that they can study further. Parents already experiencing financial difficulties may not be able to obtain loans for studies as easily as they could before the National Credit Act (NCA). In addition, grants and bursaries from many organisations have dried up.
Provision is crucial
South Africans have in recent years become chronic overspenders and the lessons from grandparents regarding saving for education has fallen by the wayside for many. The importance of making provision for children’s education cannot be overemphasised, particularly in light of the high and escalating costs of education from crèche to university.
Shireen Hassiem of the National Student Financial Aid Scheme provides an example: “If a person becomes a general practitioner and pays R222 000 for their tuition, at two percent above prime, it would take nearly 12 years, even with an annual income of R300 000, to pay off these study fees. And this does not include textbooks or accommodation. If the doctor chooses to specialise, another two years of study, after a year of compulsory community service, and an additional R53 000 or more, will be required.”
On average banks charge prime plus one to three percent more for a student loan. Considering these realities, insurance and savings products for education are vital.
If parents cannot afford tertiary education, students may have access to other resources, such as the government funded National Student Financial Aid Scheme, which assists academically deserving and poor students. Ahmed Essop, the National Student Financial Aid scheme's interim chief executive, said that since 2002, it had awarded more than R9.3-billion worth of loans, but has only managed to recover about R2.6-billion in repayments.
Patel said medical students with “good maths and science results are likely to get a bursary and if they continue to do well, their studies will be treated as a scholarship. These are normally given to second years onwards as many first years drop out.”
Even such an option can lead to credit problems for students. The National Student Financial Aid Scheme has implemented stringent methods to recover the outstanding monies. Some strategies include recruiting the specialised services of an external debt collections agency and requesting credit bureaus to blacklist defaulters. In fact, 5 968 students have already been blacklisted, with dire consequences for their future financial status.
Students in this unfortunate position, as well as their parents, must remember that if they are issued with a Section 129 letter, they can immediately seek debt counselling. In this case, all accounts get put on hold until an arrangement is agreed upon by all credit providers.
When students apply for credit, they need to understand their consumer rights in terms of the NCA. These include:
• right to apply for credit;
• protection against discrimination in respect of credit;
• right to reasons for credit being refused;
• right to information in any official language;
• right to information in plain and understandable language;
• right to receive documents;
• protection of consumer credit rights.