The recent student protests have focused South Africa\u2019s attention on the huge cost of tertiary education \u2013 and the impact that cost can have on the financial future of the students themselves, as well as their parents and others who pitch in to help them pay for their education, or to pay back their student loans.<\/p>\n
\u201cWe obviously want the students of today to become the homebuyers of tomorrow,\u201d said Shaun Rademeyer, CEO of BetterLife Home Loans, SA\u2019s biggest mortgage originator, \u201cbut the truth is that, in SA, as in many other countries, many graduates are facing years of debt repayment before they can even consider buying a home.<\/p>
\u201cIt is one of the main reasons that the average age of first-time homebuyers all over the world has risen from the mid-20s a decade ago to the mid-30s now.<\/p>\n
\u201cIndeed, a very large percentage of young adults are now not even renting accommodation after graduating, but continuing to live with their parents or other family while they tackle their student debt. That is not only reducing the demand for new apartments and starter-homes, but also limiting the ability of their parents to give effect to their own plans for retirement, which once again has a negative effect on the residential property market.\u201d<\/p>
Current estimates from the Department of Higher Education, he said, are that student debt to the universities is at least R5-billion.<\/p>\n
\u201cAnd on top of that there must be millions of Rand more owed to the banks in the form of student loans, so this is not a small problem, and it needs to be addressed soon if we want the next generation to be able to become homeowners, to start new businesses and to better the lives of their families,\u201d he said.<\/p>\n
\u201cAnd one way to do this, we believe, would be to ensure that students and their parents are better informed about the implications of borrowing money to finance their studies, about the commitments they are making to repay those loans \u2013 and about any alternative study options that are open to them.\u201d<\/p>\n
Rademeyer said it does not appear as if totally free tertiary education will be introduced in the near future, and that since so many South Africans are firmly committed to the idea that education is the best investment they can make in their future, or that of their children; student loans are probably going to remain part of SA\u2019s financial landscape.<\/p>\n
\u201cTraditionally, SA banks and other lenders have looked pretty favourably on student loan applications, and the availability of such loans has proved invaluable to parents, students and the economy as a whole,” he added.<\/p>\n
\u201cBut it is vital that the borrowers fully understand the need to service these loans correctly and on time, and to assess whether they can realistically afford the repayments \u2013 or expect to afford them once they graduate,\u201d he said.<\/p>\n
\u201cIf they cannot, they may have to consider other ways of obtaining more qualifications, such as working and studying part-time or online, or perhaps initially taking only specific short-courses to enhance their employment potential, rather than a full-time degree over three or four years.<\/p>\n
\u201cThis may seem like a long way around to a better career, but it really is preferable to leaving university with huge debt or a bad credit record that will undoubtedly hurt your prospects for years to come \u2013 or inflicting similar long-term financial damage on your parents or other family members who were only trying to help you.\u201d<\/p>\n