Housing, food, tuition, work material and basic computer equipment… Once the baccalaureate freshly obtained and in your pocket, a young student must quickly face an influx of more or less significant expenses, than his parents or a small job will not necessarily be enough to fill.
Certainly less widespread than in the countries of Anglo-Saxon culture, the student loan can represent an indispensable boost to finance a course. It is not only accompanied by specific reimbursement terms, but also by a possible State guarantee which can replace a deposit: an offer to be considered by all future students of modest origin.
What is a student loan?
The student loan is a consumer credit that allows a young person to obtain a sum of money intended to finance their tuition fees, their daily life or even potentially any other expense (no proof being required. as to the use of funds). The loan is then subject to a deferred repayment, which means that the capital begins to be repaid only after a certain period, generally corresponding to the date of end of studies.
“Note that some banks, such as Société Générale, allow total and partial release of funds, which can then be paid quarterly, semi-annually or annually…”
The amount of the loan depends on multiple factors, including of course the cost of training and, above all, the expected remuneration in the job market. This is the reason why students who integrate certain training (commerce, engineering, institutes of political studies…) will have the capacity to borrow, if they wish, higher amounts. The loan amount will depend on the bank chosen.
As a consumer credit, the student loan is subject to the same regulations, in particular with regard to the preliminary information to be submitted to the borrower, the establishment of the contract and the right (terms) of withdrawal. Although this is not an obligation, it will most often be accompanied by death and disability insurance. You are free to choose this borrower insurance, nothing forces you to choose that of the bank.
What are the types of student loans?
Two types of student loans coexist: the first, classic, requires the appointment of a surety (most often the parents) in the event of default by the borrower. The second is a specific student loan benefiting from a State guarantee.
State guaranteed student loan
The State guarantee applies to any loan of a maximum amount of $ 15,000. Through the Public Investment Bank (Bpifrance) and agreements signed with lending banks, the State will take charge, in the event of your default, of your monthly payments up to 70%. This guarantee is accompanied by a period of validity of ten years from the date of the first payment of funds by the student.
To offer their students a student loan without security or means test and backed by the State guarantee, the banks concerned have signed an agreement with the public authorities and update it every year. To date, 5 banks offer public guarantees: Crédit Mutuel, Société Générale, Banques Populaires, CIC and Caisses d’Épargne.
Be aware that the latter have the possibility of refusing you the student loan if they consider that you will not be able to repay your credit even though you have the guarantee of the state.
Important: the envelope allocated to the student loan has been fully used for the year 2018. To date, its marketing is no longer current. The system should be renewed in 2019. To monitor the progress of the allocations, you should consult Bpifrance.
Student loan with deposit
The most classic way to get a student loan is to guarantee it via a joint and several guarantee. This type of loan is thus easier to obtain and suffers from fewer constraints. Indeed, all banks offer this financing to their customers. The amount of the loan varies according to the establishments. As a general rule, it ranges, at most, between $ 80,000 and $ 120,000.
In most cases, it is the parents who give their consent, but the surety can also be given by another third party. Please note: such a guarantee commits the surety to pay in place of the credit holder in the event of default when repaying the loan.
Student loan: eligibility conditions
To qualify for a student loan, you must first prove that you are a student. This is the reason why the loan application file must include a certificate of education demonstrating that the borrower is preparing a French higher education diploma. The young person must be over 18 and under 30 (or 28 in the case of a student loan guaranteed by the State) at the time of taking out the loan, and have French nationality, be a citizen from a country in the European Economic Area (EEA) or prove that he has lived in France for at least 5 years.
Contrary to popular belief, the state guaranteed student loan is not means tested. All students can apply for it, regardless of the income of their family home. The contract cannot include a parental or other guarantee, precisely as regards the reason for being of this device.
How to simulate a student loan?
To obtain an estimate of the monthly payment of a student loan, it is possible to carry out simulations directly on the internet. Most traditional bank sites offer a simulator and at the same time detail the specific grant conditions (for example, the maximum amount of the loan).
However, this loan being quite particular, it is necessary to refine its request by making an appointment with a bank advisor. The school chosen, the age, the repayment period or the student’s needs are important variables in determining the exact amount and monthly payment of a student loan.
How to get the best student loan?
The amounts and terms of the credits vary according to the banking establishments: repayment period, amount granted, guarantees requested, interest rate offered, pricing of any credit insurance, etc.
To obtain the best student loan, obtaining at least 3 different proposals is an essential step. By comparing all of the above elements as well as the credit TEG, the borrower and his parents will be able to select the best offer. Let the competition play!
Compare the interest rate, duration and repayment terms
Banks offering student loans freely negotiate the credit TEG with the borrower, depending on their profile and the specific market situation: no constraints therefore exist on this subject. The total duration of the loan, on the other hand, is just as variable and can range from two years minimum, for the shortest, to nine, or even ten years, especially for long studies or the highest amounts to be repaid. The loan can be repaid on a deferred basis. The repayment terms will depend on the option chosen for the deductible, partial or total:
- With partial exemption, the student will have to pay monthly, during his studies, the amount of interest corresponding to the capital borrowed, possibly accompanied by the premium of the borrower insurance. The capital is reimbursed only at the end of the studies, according to a schedule fixed in advance.
- Completely free, even the payment of interest is postponed until the end of studies. This means that the student, during his course, will only have to pay the insurance premium. Note that the deferral of interest generates additional interest, and that the cost of credit is therefore ultimately higher than in the first scenario.
Note also that the contract must include the terms of early repayment of the loan. In the case of a consumer credit, penalties will – if necessary – only be paid if the amount repaid in advance exceeds $ 10,000 over twelve rolling months (0.5 or 1% of the capital borrowed, depending on the remaining term of the ready).
How to choose student loan insurance?
By taking out a student loan, the borrower is free to take out, or not, borrower insurance. If such cover is not compulsory, it is still recommended and can cover a certain number of risks. In general, two formulas are proposed:
- DPTIA insurance: Death and Total and Irreversible Loss of Autonomy;
- DPTIA insurance supplemented by a guarantee in the event of disability.
Like credit itself, bringing competition into play can be beneficial. Indeed, it is possible to take out a loan in a bank while choosing a borrower insurance with another insurer in order to obtain better guarantees and / or a better price.
Renegotiating your student loan: is it possible?
Renegotiating a debt involves asking the lender to review the conditions of lower interest rates. In the case of consumer credit, a student loan cannot be renegotiated, at least not in the strict sense of the term.
However, it is possible to have your student loan bought back by another bank. However, it will be necessary to wait until the loan is being amortized, that is to say, upon entering working life. Redeeming a student loan can lead to significant savings. Two possibilities then exist:
- decrease the amount of the monthly payment without modifying the repayment period. This makes it possible to lighten the monthly budget allocated to repaying the loan;
- reduce the total duration of credit repayment without modifying the amount of the monthly repayment. The financial gain is then greater.