Old student debt is increasingly becoming an obstacle for people wishing to buy their first home, a home loan official said.
Old student debt is increasingly becoming an obstacle for people wishing to buy their first home, a home loan official said.
Shaun Rademeyer, CEO of BetterBond Home Loans, recommends that students consider working and saving for their education. If that isn’t possible or desirable, he said, they should keep borrowing to a minimum and find out the total they will have to repay before taking out the loan.
“If it is at all feasible, they should also get some sort of a part-time job – not only for the extra money they will earn but for the work record and experience they will gain,” he said.
“Young South Africans are generally committed to the idea that education is the best investment they can make in their future, but the high costs of obtaining a tertiary qualification are driving more and more of them to rely on student loans from the banks or the National Student Financial Aid Scheme (NSFAS),” he said.
The NSFAS is currently making about R9bn worth of loans to 400 000 students a year, but only receiving about R400m in repayments annually, Rademeyer said.
The major reason for this lingering debt, Rademeyer said, is the difficulty many graduates have in finding employment. NSFAS loans don’t have to be repaid until the student is employed and earning at least R30 000 a year. He pointed out that interest accrues on these loans at 4% a year.
“Increasingly we see that old student debt is a significant obstacle for many who are ready to buy their first homes, because it prevents them from being able to qualify for home loans and may result in them having to delay their purchase plans by months, if not years,” he said.
Rademeyer said that BetterBond’s statistics show the average age of first-time homebuyers in SA has advanced from 27 or 28 in the1990s to 34 or 35 now.
