South Africa’s biggest banks are recording a hike in the demand for student loans, with one institution even reporting increases of loan pay-outs to clients of more than 100% in just six months. Interestingly, it is not only the so-called missing middle who do not qualify for the National Student Financial Aid Scheme, but clients with incomes in the R850 000 to R1 799 999 range.
The banks cite a number of reasons for the surge in the demand, which range from financial constraints brought about by the tough macro-economic environment and the increase in the cost of living to the affordability of student loans compared to other forms of credit, and people’s career development aspirations to improve their income prospects.
FNB, which reported an increase of 116% in student loan pay-outs in the six months ending December last year, said while many of its clients were taking out student loans for family members’ education, they had found that many clients used the student loans for their own career development.
Product head of FNB Loans Gavyn Letley said: “Education is an important enabler of success, but many families in our society do not always have the financial means to pay for the cost of their loved ones’ education. Funding of this nature could also go a long way in helping families seeking to better their lives by investing in their future.”
Letley said the fact that the bank also introduced the student loan application process on its banking App late last year contributed to the rise in student loan clients.
Standard Bank has also recorded a year-on-year increase in the number of student loans taken up by clients. The bank’s head of youth and mass-market clients Tshiamo Molanda said student loans peak season was between January and March.
Molanda said most undergraduate loans taken up were for studies in economics and management and health sciences, including the Bachelor of Medicine and Surgery (MBChB).
“From a full-time with surety offering, we see more students approaching us for funding overseas at South African Qualifications Authority (SAQA) accredited institutions and courses,” she said.
“Self-funding is becoming increasingly difficult in this economic climate, the unemployment rate and cost of living means that households may find it difficult to afford the high education costs,” added Molanda.
Warren Tromp, executive for product development at Nedbank, said they had seen a slight increase in student loans in the first quarter of this year compared to last year.
“Applicants are typically part-time students, with majority studying at IIE Varsity College, University of South Africa (Unisa) and Stellenbosch University.
“More students who have student loans have applied to Unisa this year, compared to last year,” he said.
Head of personal loans, consumer lending at Absa, Nick Nkosi, said the bank continued to see a strong growth in the study loans products.
“This is against the backdrop of an overall 12% rise in loan production in Absa’s retail segment for the year ended December 2022,” said Nkosi.
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