You wish to continue your studies, but you do not have sufficient or regular income: be aware that banking establishments can grant you a loan to finance your studies.
1 – What is the student loan used for?
The student loan is not only intended to finance registration and tuition fees. It can also fund the purchase of equipment (computer, etc.) or pay for day-to-day living expenses (rent, food, car, etc.).
2 – What are the characteristics of the student loan?
A student loan is an “allocated” consumer loan, i.e., it is used to finance studies and all that goes around (tuition fees, accommodation, etc.) for the duration of the studies: we know from the start the purpose of the financing.
The interest rate of student loans is often more attractive than that of traditional loans because banks are interested in young customers. Indeed, as new customers, they can open a bank account, subscribe to banking products and services (card, etc.).
The annual percentage rate of charge (APR) includes all costs: interest, insurance, application fees, etc.
The APR varies according to the banks, between 1 and 2%. Some banks offer even more attractive rates as part of partnerships with particular schools or universities.
Do not hesitate to compare rates and offers and play the competition before subscribing.
3 – What are the conditions to be met?
- To obtain a student loan, you must be of legal age (18 years old) and generally under 30 years old. Exemptions are sometimes granted to older students.
- You must prove your situation by producing a student card, a school certificate, or a registration certificate in your school or university.
- You must have French nationality or prove that you have resided in France for at least five years.
- The bank sometimes requires that you take out death and disability insurance. But you can take out this insurance with the organization of your choice.
- The bank often asks that a person (relative, other) stand surety, especially if the loan amount is significant. In case of repayment difficulties, the bank can then turn against the deposit to reimburse the credit for you.
4 – How much to borrow?
A student loan often varies from €800 to €50,000, depending on the bank. It can sometimes go beyond that.
The amount of the loan is determined according to your needs. Still, it can also vary according to the duration of the studies, the school is chosen, in particular, the possibilities of repayment once entered the active life.
Thus, banks are often interested in students from Grandes Ecoles (commerce, engineers, etc.) because the professional opportunities are significant and higher hiring salaries.
Therefore, you will have access to different amounts and at different rates, depending on your studies, income, and deposit.
You can apply for a new student loan each year or take out one for a more significant amount. In the first case, you are unsure whether the bank will grant you a loan in the following years and at what rate. You will also have to pay an application fee each time.
It may be better to apply for a single loan. On the other hand, you must plan the amount you need to cover for several years. If necessary, you can request an additional loan if this is not enough.
5 – How to use the loan?
Generally, you are not required to justify using the sums borrowed: they can be used to pay tuition fees, daily living expenses, etc.
But beware of the release of funds!
Indeed, if the bank releases the entire amount at once on your account, the interest is calculated from the payment of the funds. You, therefore, pay interest on the whole loan, whereas you are not going to use the entire sum immediately.
So check with the bank if it can release the funds gradually. You can then see with your banker the schedule (every year, every semester, every month) and the amount of the subsequent payments. Some banks allow you to request the price of the sums according to your needs. The total cost of credit is lower because interest only accrues from each release of funds.
6 – How to repay the loan?
The duration of a student loan is variable, often between 2 and 10 years.
The course of a student loan is divided into two parts:
A – During your studies, you benefit from a “franchise period” or “deferred reimbursement,” which can be partial or total. The franchise period varies from 2 to 7 years. The longer the grace period, the shorter the repayment period.
Two types of delay exist:
- partial deferral: you only pay, each month, the interest and the insurance contribution,
- Le deferred total: you only pay, each month, the insurance.
The total deferred is more expensive because the interest due each year is added to the amount of the capital borrowed and, in turn, produces interest.
B – At the end of the franchise period, generally at the end of your studies, the loan repayment period (amortization phase) begins.
You can prepay your loan at any time (in part or whole). You may be asked for a reimbursement indemnity if the amount reimbursed is more significant than €10,000 over 12 months. This indemnity may not exceed:
- 1% of the amount of the credit if the remaining duration of the credit is more significant than one year,
- 0.5% of the credit amount if this duration does not exceed one year.
7 – What will you have to pay?
The student loan cost depends on the interest rate applied by the bank, the amount of the death and disability insurance contribution that you must take out, and the administration fees. It also varies according to the amount borrowed, the rate at which the funds are made available, and the chosen repayment terms.
You can use our calculator to calculate your monthly student loan repayments.
8 – What to do in case of financial difficulties?
In the event of difficulty repaying a student loan, you must quickly contact your bank advisor to find a solution (relief in monthly payments, postponement of repayment, etc.).
9 – Our advice
Do not hesitate to play the competition by comparing, in particular, the interest rates (APR), the administrative fees, the cost of the insurance before taking out a student loan.
Negotiate the possibility of extending the repayment period until you find your first job at the end of your studies.