Education, especially at the tertiary level, can be expensive. A lot of students, parents, and guardians in the Philippines struggle to pay for higher education due to the costs. Although scholarships, grants, and bursaries help, they are not available for everyone and may not always be sufficient. Student loans are some solutions people turn to for college and university financing. In this guide, we cover the fundamentals of a student loan, including the different types available and how to apply for one.
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What is a Student Loan?
It’s money advanced to a borrower to cover the cost of higher education. Individuals who require financial assistance paying for college, university, or technical training programs can apply for student loans. A student loan can cover the school fees and other costs, allowing you to study stress-free. In the Philippines, private and federal student loans are available for borrowers. Several factors determine the right loan. Unlike a grant or scholarship, you must repay a student loan with interest, usually after graduation. So, when taking out one, consider the loan amount, interest rate, and loan term.
- Quick disbursement if approved
- Lower interest rates than other loans
- A credit score is not necessary
- Easy repayment terms
- Stringent application requirements
- Penalties for late repayment and other charges inflate loan costs
Types of Student Loans You Can Find
Filipino students have a few options when searching for financial help. Knowing how different products work is critical to choosing the perfect student loan. You can analyze the pros and cons of specific products and decide if they satisfy your requirements. This section explores the two main kinds of student loans.
The federal government grants financial aid to needy students through lending programs. Borrowers can select between direct subsidized and direct unsubsidized loans. Direct subsidized Loans reduce the cost of the loan by offering considerably lower interests than the private sector. Unsubsidized loans might not be as cheap, but they still increase access to borrowers. The main federal loans for higher education are:
- CHED – Unified Financial Assistance System (UniFAST)
- SSS Student Loan
- GSIS Student Loan
For students who can’t access federal loans, private lenders are suitable alternatives. Banks, credit unions, and other financial institutions offer education financing. Some lenders have student loans with low-interest rates and favorable repayment terms. The eligibility requirements vary across lenders. Hence, check with individual companies. Examples of private loans for students include:
What to pay attention to when taking a loan
Loans are made differently. What might be an ideal student loan for you might be too expensive for the next person. Therefore, you must know how to choose an alternative that serves your needs. Although the specifics of a loan differ across lenders, a few elements are constant, and here are the most important to consider.
A loan’s interest rate determines the overall cost because it’s the amount a financial institution charges for granting you the funds. Private lenders and the federal government typically charge lower rates for student loans compared to other products. Rates range from 5% to 35% per year. Below are the main methods used to charge interest.
Variable Interest Rate
This interest rate changes throughout the lifetime of the loan. Hence, your monthly repayments fluctuate according to the current rates. Although you could save money when rates fall, you also risk paying more if there is a hike.
A student loan with a fixed interest rate remains constant for the entirety of its term. The plus side is that you can calculate the repayments, and you don’t have to worry about market rate spikes.
When you apply for a student loan, be sure you can meet the loan repayment terms. Lenders have different conditions for repayment, and you should know about them beforehand. Student loans are usually more lenient than other products when it comes to repayment. Nonetheless, failing to fulfill your monthly commitments can ruin your credit, making it hard to apply for loans in the future. Here are several vital factors about repaying an education loan in the Philippines.
Full Principal and Interest Payment
Most private loans require you to repay the entire principal granted and the interest accumulated according to the agreed terms.
Diminishing Principal Payment
A student loan can ask you to pay the loan amount plus the interest based on the diminishing loan balance. It means as the loan balance decreases so does the interest owed.
This condition puts off repayment for a particular period. Whereas some loans are due 30 days after disbursement, others out off repayment until after graduation. The grace period varies among lenders. Some student loans defer payments for up to 5 years.
Benefits of a Student Loan
The advantages of a student loan vary from one product to the next. Generally, these lines of credit charge low interests. However, you can enjoy significant savings on certain loans from the federal government. Subsidized loans reduce the interest rate considerably, allowing you to borrow a decent amount without the fear of crippling debt.
You can build your credit rating with a student loan, but only if you meet the monthly payments. Graduates find it hard to borrow money due to their limited credit history. An education loan is one way to establish a credit history and work on your creditworthiness.
Funding is available for students studying abroad. Some lenders have special programs for OFWs and seafarers, while others provide international loans, especially for students in the US and Canada.
The grace period that comes with some loans is another benefit. A bank or lending company can give you a few years after graduation before you can start paying off the loan. This period is meant to give you time to find employment and plan for repayment.
Specifics to Student Loans in the Philippines
Despite the numerous options for student loans on the market, the products are not very popular in the Philippines. College students are used to different forms of financial aid, like grants and scholarships. Nevertheless, loans are viable alternatives for individuals who cannot afford to pay for tertiary education. Federal student loans are more attractive than private loans for Filipinos because they are low-cost. The CHED student loan program is the go-to since it’s available for many students. Through the Tertiary Education Subsidy, it provides short-term loans to graduates renewing for the licensure exam, undergraduates, graduates, and medical and law students. You must be in a CHED-approved program and school to apply for the federal student loan.
Note that most government loans conduct interviews, in-person or on the phone, during the application process. Not many non-government banks in the Philippines offer education loans. So, if you intend to borrow from a private lender, ensure you shop for the best products. Remember to only work with lenders licensed with the SEC. Students can also get loans from their schools. Several higher-learning institutions offer student loans. Examples include the University of the Philippines, De La Salle University, and Mapua University. When applying for a loan, a government ID carries more weight, although some lenders accept student IDs.
How we Select the Best Student Loans
Whether you are looking at private or federal student loans, you must be careful with the selection. A student loan can tie you into a debt commitment for years. Therefore, you have to be sure you can handle the responsibility. Our comparison site makes the process of picking a student loan as painless as possible. We thoroughly review different student loans in the Philippines. By comparing interest rates, loan repayment terms, amounts, and application requirements, we rank the best student loans.
How to Apply for a Student Loan in the Philippines
Research Student Loans
Look up the available lending programs for Filipino students. Read reviews, then compare federal loans and private products.
Pick the Best Offer for You
Select the option that gives you the loan amount, interest rate, and repayment terms you want.
Find out if you qualify for the student loan you wish to apply for.
Prepare Supporting Documents
Put together all the requirements, such as your student or government ID, parent’s or guardian’s ID, and parents’ proof of income.
Complete the Application Form
Get the necessary forms from your chosen lender and provide the relevant details accurately. Most loans allow online applications.
Submit Your Application
Send the form and all the required documentation, then wait for the response.
Alternatives to a Student Loan
Even though student loans come with low interest, Filipino college students have other options they can consider for financial assistance. We explore a few.
Merit-based scholarships are the most popular ways for bright students without financial means to get a higher education. This type of scholarship imposes academic requirements. Previous grades and, in some cases, a scholarship exam determine eligibility. Scholars also have to maintain high academic performance to continue receiving support. A full-time scholarship covers the entire cost of the program.
Athletic scholarships reward students with excellent skills in particular sports. Although applicants must also maintain certain grades, their athletic performances are the principal deciding factor. You can get a full or partial athletic scholarship.
Grants give cash from sponsors to eligible students. A grant can factor in your economic status or academic performance. You can use the funds for school fees, books, housing, and other expenses.
Work-study aid programs are available at various colleges and universities in the Philippines. With this alternative, students get part-time jobs to help pay for their education.
Parents and guardians can take out loans from their banks. Several non-government banks and credit unions have education loan programs. If they are long-term customers, they can negotiate favorable rates and repayment terms.