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Education loans Australia
Investing in your education can be a smart money move. But with some post-graduate courses costing up to $50,000, it’s certainly not a small investment.
Particularly at a time when you may not be earning as much. And if you’re considering private school for your kids, you don’t need me to tell you how expensive that is.
This guide to education loans will explain your options and how to make sure you don’t pay any more than you need to.
How do education loans work?
Education loans are a type of personal loan you can use to pay for the cost of studying or private school fees.
Generally this is what you get with an education loan:
- Borrow between $2,000 to $100,000 (our personal loan statistics show the average loan is just over $22,000).
- And repay it over a term between 1 and 7 years.
- You’ll make regular repayments — weekly, fortnightly or monthly — during the term.
- Education loans are generally unsecured personal loans, meaning you don’t need to provide an asset you own as collateral. But there can be secured options available.
- The interest rate on your personal loan will depend on your credit score and other factors specific to you.
- Your interest rate can either be fixed or variable.
What can I use an education loan for?
Typically you can use the money for anything related to your studies. Most students use education loans to pay for things like:
- Admission fees
- Course/tuition fees
- Textbooks, laptops, course-related purchases
- Accommodation & living costs
- Travel costs
- Scholarships costs (some scholarships may be partially funded by students)
How to choose an education loan
Just like deciding on a course, choosing a loan is a major decision.
When you’re comparing your options, you’ll want to look at more than just how much you can borrow. This includes:
1
Interest rates
How much extra you’ll pay on the amount you’ll borrow.
2
Fees
Upfront and ongoing charges (you may be able to avoid fees completely on some loans).
3
Loan term
A short loan term means higher repayments, but you’ll pay less interest compared to a longer term (you can see the difference by trying different loan terms in our personal loan calculator).
4
Features
Like being able to make extra repayments and pay off the loan early without penalty. A redraw facility can be handy too as it allows you to withdraw your extra repayments if you need to access cash.
How to qualify for an education loan
You can apply for a loan for education in Australia if you are:
- Over the age of 18
- An Australian citizen or permanent resident
- Employed or have a regular source of income to cover the repayments
If you meet these initial eligibility criteria for an education loan, the lender will still need to assess your application based on your financial situation.
They do this to ensure the loan isn’t unsuitable for you and you can easily meet the repayments. Lender usually consider:
- Your credit score
- Your income
- Your employment status (full-time, self-employed etc.)
- Assets you own
- Your regular expenses
- Your other debts (e.g credit cards)
- How many dependents you have
How to apply for an education loan
To get an education expenses loan you will need to:
- Submit a personal loan application to a lender
- Meet the approval criteria for the personal loan
- Provide documents requested by the lender to prove your identity and financial details (e.g. payslips, bank statements, credit card and loan statements)
- If you can’t supply the standard documents (e.g. you’re self-employed) you could consider applying for a low doc personal loan.
Pros & cons of education loans
Pros
- May enable you to pursue study that would be otherwise out of reach.
- You may have the flexibility to structure your loan term to keep loan repayments low while you’re studying but pay extra when you’re finished.
- Depending on your circumstances, you may be able to claim your education loan costs (e.g. interest) as a tax deduction (according to the ATO).
Cons
- Interest and fees on your education loan will add to the overall cost of your study.
- If you choose a long loan term you could be repaying the finance long after you’ve finished your study.
- Due to the eligibility criteria, it may not be suitable if you won’t be earning while you are studying.
Can I get help from the government?
Before you apply for an education loan, make sure you check if you’re eligible for any government or other financial assistance.
Higher Education Loan Program (HELP)
The government offers a number of different interest-free loan schemes for eligible students enrolled in a Commonwealth supported place at university. There are loans that can be used for both tuition fees and living costs, including OS-HELP, which can be used to fund overseas study.
VET Student Loans
This program helps eligible students pay tuition fees for approved higher-level vocational education and training (VET) courses. To be eligible for a VET Student Loan you must be studying at a VET Student Loans approved course provider.
Government student assistance
Government assistance programs are available for eligible students, offering regular cash payments that do not have to be repaid.
Scholarships
Most universities offer scholarships that can cover part or all of your study costs. These are usually available for students in their first year of study right through to the postgraduate level.
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