Student loans: Is it really worth it?

In the quest for higher education, the financial burden can often seem insurmountable, especially in the Philippines where the cost of education continues to rise. This challenge, however, should not deter aspiring students from pursuing their academic dreams. Student loans emerge as a beacon of hope, offering a viable path to achieving educational goals without the immediate financial strain. This guide aims to demystify the process of securing a student loan in the Philippines, providing essential insights and tips to navigate this journey effectively.
What is a student loan?
A student loan is a type of financial aid designed to help students and their families cover the costs associated with higher education. Unlike scholarships and grants, which do not require repayment, student loans must be repaid with interest. These loans can be used to pay for tuition, books, and other educational expenses, making higher education more accessible to those who might not afford it otherwise.
How can a student loan help you?
Securing a student loan can bridge the gap between your educational aspirations and financial realities. It allows you to focus on your studies without the constant worry of financial constraints. Moreover, investing in your education through a loan can lead to better career opportunities and higher earning potential in the future, making it a worthwhile endeavor.
How to apply for a student loan?
Applying for a student loan in the Philippines involves several steps, starting with researching the different loan options available. Potential borrowers should compare the terms and conditions of various loans, including interest rates, repayment schedules, and eligibility criteria. Once a suitable loan is identified, the application process typically requires submission of financial documents, proof of admission to an educational institution, and sometimes, a co-borrower or guarantor.
Is it expensive to get a student loan?
The cost of obtaining a student loan varies depending on the lender and the terms of the loan. Government programs often offer more favorable terms, including lower interest rates and longer repayment periods. Private lenders, on the other hand, may charge higher rates but offer more flexibility in loan amounts and repayment options. Understanding the total cost of the loan, including interest and fees, is crucial before making a commitment.
Best student financing options in the Philippines
The Philippines offers a variety of student loan options through government programs, private banks, and educational institutions. Government programs like the CHED UniFAST Student Loan Program and the SSS Educational Assistance Loan Program provide loans with favorable terms to eligible students. Private banks and financial institutions also offer loans, often with more flexible repayment options but higher interest rates. Additionally, some educational institutions have their own loan programs to assist students.
Here’s a breakdown to help you find the best fit:
Government Programs:
- CHED Unified Financial Assistance System for Tertiary Education (UniFAST): This offers scholarships and grants, as well as subsidized loans with minimal interest. It’s a great option if you’re a good student and financially needy. You can check with the Commission on Higher Education (CHED) for details;
- Other Government Agencies: SSS and GSIS also offer educational loan programs for their members. These may have slightly higher interest rates than CHED programs, but still offer better rates than private options. Check their websites for eligibility and application procedures.
Private loans
Several banks offer student loans with competitive interest rates. BPI is a good example. This may require good credit history or co-signers, thought.
BPI Special Installment Plan
BPI offers a student loan option through their Special Installment Plan (SIP) for partnered schools. It’s not exactly a traditional student loan but leverages your existing BPI credit card.
Here’s a breakdown of what to know
- Loan amount: this depends on your available credit limit on the BPI credit card you hold;
- Interest rate: the advertised rate is attractive, with a monthly add-on rate as low as 0.75% for repayment terms of up to 24 months;
- Term: you can choose a repayment period between 3 and 24 months;
- Eligibility: this option is only available for existing BPI credit cardholders in good standing. There might be specific credit card types included in the program.
Here are some things to consider with a BPI SIP School Loan:
- Interest: while the monthly rate seems low, it translates to a higher effective interest rate compared to traditional student loans. Make sure you understand the annual percentage rate (APR) before applying;
- Credit card impact: using your credit card limit for this loan reduces your available credit for other purchases. Be mindful of managing your credit utilization;
- Limited amount: the loan amount is capped by your credit limit, which may not be enough to cover all your educational expenses.
Alternatives to BPI SIP School Loans
Aside from BPI, several other banks in the Philippines offer student loan programs. Here are some of them:
- Landbank I-STUDY Program: this program offers loans directly to parents and guardians of students to cover tuition fees. They can borrow up to P300,000 with flexible payment terms;
- Metrobank E-Study Loan: this loan program caters to students enrolled in accredited undergraduate or graduate programs. It offers competitive interest rates and flexible payment options;
- Security Bank Study Right Loan Program: this program provides financing for tuition fees, seminars, and other school-related expenses. They offer competitive rates and long repayment terms.
Online Lending Companies
Bukas and InvestEd are popular options. They offer flexible payment terms and fast application processes, but interest rates might be higher than banks. Below, we look at this category of lenders in more details.
Bukas
Bukas Finance Corp. offers affordable tuition installment plans for Filipino college and graduate students. Here’s a quick summary of what we have found:
- Bukas Tuition Installment Plans: this program allows students to spread out their tuition payments over 3, 6, 9, or 12 monthly installments, making it easier to manage educational expenses;
- Wide partner network: Bukas partners with many colleges and universities throughout the Philippines, so there’s a good chance your school is included;
- Eligibility requirements: to qualify, students must be at least 18 years old, Filipino citizens, and have a co-borrower and an additional contact person;
- Online application: the application process is conveniently done online at app.bukas.ph.
InvestED
InvestEd is a Philippines’ student loan company that offers educational loans. They are a duly registered lending company. InvestEd has helped thousands of students from 2,162 schools across 64 provinces. They offer a variety of student loans including tuition installment plans, gadget plans, thesis plans, rent plans, board exam plans, and allowance plans. InvestEd’s loans are accessible through a free and convenient online application process.
Choosing the best option:
- Government programs are generally the most affordable option due to lower interest rates or even subsidies. However, qualification can be competitive;
- Private loans offer more flexibility and may be easier to qualify for, but interest rates can be higher.
Common mistakes to avoid with personal loans
When navigating student loans, common pitfalls include borrowing more than necessary, overlooking the terms and conditions of the loan, and failing to consider alternative funding options. It’s also important to avoid late payments, which can lead to penalties and negatively impact your credit score.
10 Tips to Help You Obtain a Student Loan
- Research all available loan options;
- Compare interest rates and repayment terms;
- Only borrow what you need;
- Consider a co-borrower to improve eligibility;
- Maintain a good credit score;
- Explore scholarships and grants as alternatives;
- Understand the loan’s terms and conditions fully;
- Plan your budget to accommodate loan repayments;
- Keep track of all loan-related documents;
- Start saving early to minimize the amount you need to borrow.
Conclusions
Student loans can play a pivotal role in making higher education accessible and affordable. By carefully selecting the right loan, understanding its terms, and managing repayments responsibly, students in the Philippines can invest in their future without the burden of unmanageable debt. Remember, education is an investment in yourself that can yield significant returns over time.
Frequently asked questions
- Can I apply for a student loan if I’m already receiving a scholarship? Yes, you can apply for a student loan to cover additional expenses not covered by your scholarship.
- What happens if I fail to repay my student loan? Failing to repay a student loan can lead to penalties, damage to your credit score, and potential legal action. It’s important to communicate with your lender if you’re facing financial difficulties.
- Can I prepay my student loan without penalties? This depends on the terms of your loan. Some lenders allow prepayment without penalties, while others may charge a fee.
- Are there student loans available for Filipinos planning to study abroad? Yes, there are loan options for Filipinos studying abroad, including loans from private banks and international lenders.
How long does it take to get approved for a student loan? The approval time can vary depending on the lender and the completeness of your application. It’s best to apply well in advance of when you need the funds.