Why are student loans necessary?
Studying is a full-time job. Or at least you should be approaching it like one. Finding time and energy to work next to it can be complicated. In other situations, work permits or language barriers make it difficult to find a job you can legally do and qualify for. In these situations, student loans are a great way to have sufficient funds to survive.
What is covered by a student loan?
Depending on the institution who provides the student loan, you might have to agree to spent the money on specific items. For example, you might only be allowed to spent the money to pay for tuition costs, books, room and board. In other cases, the loan is provided to reduce the hardship of being a student and in those cases, the money can be spent more freely.
Often, student loans provided by commercial banks for a low-interest rate can be used for any expenses. Loans that are given by governmental institutions can have stricter requirements on who is eligible to receive them, and how they have to be used. Sometimes these government loans are interest-free. Remember that the goal of the commercial institution is to make a profit. This means they also want to profit from you, the student who is taking out a loan. A governmental institution, on the other hand, is a non-profit institution. Profiting from you is not their main goal.
Examples of student loans
Countries have different regulations for student loans. Below I provide three national examples (Netherlands, Germany, and Ireland) and one intra-national example (Europe).
in the Netherlands, three different loans are provided: Student financing, supplementary grants, and tuition fee loans. Student financing is a loan you can spend on any expense you have. How much you receive depends on your parents’ income, and how much you have to pay back will depend on your income after your studies. Supplementary grants are for those students whose parents have a low income and do not need to be repaid on the condition that student receives his/her degree in 10 years. Finally, the tuition fee loan can only be used to pay for the yearly tuition costs.
Students in Germany can make use of many different grant schemes. The most common one is Bafög. This loan is tied to a number of conditions but is interest-free. The goal of this loan is to provide equal chances for studying regardless of the socioeconomic class of parents. If you study in Germany you can also ask for a ‘Deutschlandstipendium’ (Scholarship for Germany). This is a grant and not a loan, but only for talented students. If you consider yourself talented (enough), fill out the forms and wait. You never know. Finally, you can also apply for a ‘Bildungskredit’ (Educational credit), which is a financial contribution. This needs to be paid back, but it comes with an attractive interest rate.
Banks in Ireland offer two types of loans: One to pay for tuition costs and one to pay for living expenses. Make sure to read the fine print and spent the money wisely. Also check, what your institution offers for financial aid.
Thanks to the European Commission, a special loan is provided for master students (Erasmus+ master degree loan). This loan is currently only available in specific countries (Spain, Turkey) or for master students at the specific university (University of Luxembourg and University of Cyprus). Another widely popular grant is the Erasmus+ grant which is for all European students who want to go abroad. It’s a financial contribution to your travel and living costs and tied to the living costs of your host country.
Remember, to always read the fine print of the loan agreement you sign. Important things to consider are :
- When do you need to start paying back the loan?
- How much per month do you need to pay back?
- What is the interest rate? Variable interests rates can be low, but your finances are harder to plan.
- What will happen if you can not make your monthly instalments?
If you decide to get a loan, budget the money properly. Consider, do you need the money or do you want to have more money? Remember that you can study where you want. You can always pick a country with lower costs of living, or super attractive student loans.