60% of high school graduates in the Philippines today do not possess the needed financial strength and capability to proceed for college education after high school; only 40% of students in the Philippines have the resources to proceed to college after high school. This problem has hindered most students from attaining educational and sustainable growth and development. Students who do not have the financial capabilities to attend college can still do so. You can apply for personal loans or apply for a student loan, whether federal loans, private or refinance ones, which will assist them in achieving their set goals.
What is a Student Loan?
Student loans refer to money borrowed to cover the expenses of a higher college education. These funds usually cover tuition fees and other related school expenses such as books and educational material, thesis, gadgets and tools, allowances, accommodations, and living expenses. Student loans are just like regular loans, and they have to be repaid on a regular basis with some interest. Some platforms offer borrowers the option to repay the loan after they graduate or find a job.
Is there a student loan in the Philippines?
Yes, student loans are available in the Philippines. You can apply for the CHED UniFAST short-term loan with a repayment period of one year, the SSS Educational Assistance Loan Program with a repayment plan of 5 years, and the GSIS Educational long-term loan with a repayment plan within 10 years. - all these options should be later described.-done
In 2019, the Commission on Higher Education (CHED) and the Development Bank of the Philippines (DBP) launched a program that offers short-term loans to student borrowers (public and private) or postgraduate students aiming for a diploma to serve as a financial aid during their studies. Apart from the federal government loan program for learners, most private institutions also offer student loans. The latter are an option for people looking forward to attending higher education.
What are the main types of student loans?
The three types of student loans are the federal, private, and refinance loans.
-
Federal loans are loans offered by the federal government. Most federal student loans do not require a cosigner, and every enrolled student in the Philippines with a high school diploma can apply for a federal loan by filling out the application for Federal Student Aid.
-
Private loans are loans issued by private lenders. They can cover the education expenses and living costs of your higher college education. Private loans usually come with less flexibility for borrowers, and the interest rate of private loans can be on a high side, depending on the private lender.
-
Refinance loans are loans that can replace your current loan at a lower rate with that of a private lender. This can help you save your money. Ensure that refinancing is the best option for you before doing so.
Types of federal student loans
-
Direct subsidized loans. Undergraduates with financial needs can get subsidized loans. During your grace period, the government will usually pay the interest on direct subsidized loans.
-
Direct unsubsidized loans. You don’t need to show financial need to get unsubsidized loans, and they’re an option for both undergraduate and graduate students. Immediately you are given the unsubsidized loan, the interest you have to pay throughout the period of the loan starts accumulating.
-
PLUS loans. Both graduate students and parents can access the PLUS loan. PLUS loans usually have the highest origination fees and interest rates compared to government loans.
Types of private student loans
-
Private loans. Private student loans can cover any costs related to attending college and originate from a bank, credit union, or an online lender. You should look into private loans if you have exhausted all the federal loans available to you because private loans come with less flexibility for many borrowers.
-
Student loans without a cosigner. Undergraduates in particular often need a cosigner to get a private loan, though some lenders can look at your ability to repay the loan based on your credit history, credit check and future income, and may likely grant you the loan without a cosigner.
-
Credit union loans. You can also get private loans from community banks and credit unions and other institutional loans provided. You may be given better terms and conditions with community banks and credit union loans compared to the offer from bigger financial institutions, most especially if you have an existing relationship with one of these institutions.
Types of student loan refinancing
-
Refinance student loans. Student loan refinancing replaces your loan at a lower rate than that of a private lender. This can help you save your money. Ensure that refinancing is the best option for you before refinancing your loan.
-
Parent PLUS refinance loans. PLUS loans can easily be refinanced by parents because most parents have a better credit history and can easily access it at a low-interest rate.
How can I get a student loan?
There are three main options for getting student loans. Federal student loan programs, private loans institutions, banks, and online lending companies are currently the most popular choices for anyone looking to apply for a personal loan for a college education. Below is a rundown of how both federal and private loans work.
-
Government-sponsored loan programs. GSIS, Landbank, UniFast, and SSS are examples of federal student entities that offer personal loans to qualified student borrowers. The loans cover all the necessary educational expenses. You can apply for the federal student loan by submitting an application form together with relevant school documents and proof of income from a cosigner in order to apply for federal student loans. Most federal student loans offer student loan forgiveness. They serve as financial aids for learners to sort out their school fees, summer classes, college tuition, and other education expenses. They also offer scholarship opportunities for students studying abroad, part time students, professional, and private learners.
-
Online lending companies. Online Lending institutions like InvestEd and Bukas.PH offer student loans up to ₱100,000 and provide flexible and transparent repayment plan. Application is done through their website.
-
From banks. Most banks in the Philippines offer personal loans to individuals with an existing account; they can in turn choose to use these loans as education loans to fund the education of their children. Private loans offer higher amount compared to the sum offered by most federal student loans. Be aware that these are personal loans, and they usually higher interest rates.
How to apply for a student loan?
Here is how to apply for a student loan to fund your college education.
-
Research on student loan offers. Unlike personal and payday loans, student loans are not popular among Filipinos, so it would be helpful to do research on the different Study Now, Pay Later programs available for college students like you.
-
Compare student loans in the Philippines. Most federal and private loans usually come with different interest rates. Government-issued loans are usually inexpensive in terms of rates and fees but may require you to undergo a rigorous process during the application. Nevertheless, the tedious process is worth it because you can save money.
-
Ask for a sample computation. Ensure that you compute the monthly installments you have to repay beforehand to be sure if you or your parents can afford it. You can do this by checking samples of the computation on the website of the lender or through their customer representative or social media if they are not available on their website.
-
File your student loan application. Once you have done your research and settled for the kind of a loan you want, make ready all the required documents, and then submit an application to the financial institution offering the student loan.
Main requirements for getting a student loan
Below are the main requirements and documents you need to apply for a personal loan.
-
Student ID
-
Birth certificate
-
Parent’s marriage certificate
-
Form 137 (high school card)
-
Clearance from the previous school
-
Certificate of graduation
-
Parent’s ID
-
Parent’s income tax return (ITR)
Once your requirements are complete and ready, you need to submit an application to the financial institution providing a student loan. You can apply in-person or online, depending on the financial institution.
Ways to get a student loan
The way you get get a student loan depends on the institution you are applying it.
Government institutions
There are various government bodies that offer selected student loans to Filipinos, some of the most popular are given below.
CHED UniFast Loans
CHED is the institution that promotes college education to students. It offers short-term loans to college, graduate, and professional students. The organization offers UniFast loans, which are also called Unified Student Financial Assistance System for Tertiary Education Program.
To qualify for this loan, a student must be a Filipino undergraduate or a graduate student enrolled in any of the State University Colleges (SUCs), or CHED-recognized Local University Colleges (LUCs), and private Higher Education Institutions (HEIs). Should not have availed any loan during undergraduate years. Should be pursuing a program accredited by CHED.
Here, the minimum loan amount is ₱30,000, and the maximum loan amount is ₱ 60,000. There is no interest rate if the loan was paid on or before the end of the semester.
Once you have all the required documents, fill out the student loan program application form with all your personal and financial details. You will also have to attach a picture of you along with the name of your guarantor. Then, submitthe documentary requirements to your school. The school will now screen and sign your loan application to CHED UniFast coordinators.
GSIS Educational Loans
Government Service Insurance System (GSIS) education loan is a study-now-pay-later program for GSIS members to cover the educational expenses of their children.
To be qualified for this loan, the student beneficiary must be related to the GSIS member to the third degree of affinity and must be in a private or public educational institution pursuing a four-year course. GSIS offers loans amounting between ₱10,000 and ₱100,000 per academic year.
To apply for this sum, the borrower can directly apply through the GSIS website or submit an application in any near GSIS Office.
SSS Educational Assistance Loan Program (EALP)
The social security system educational assistance loan program is a loan that is accessible only to SSS members. It can be used to cover the educational expenses of the member or their children.
To be qualified for this loan, a student should either be the child of a SSS member or the member himself. It is also mandatory for the student to be under a full tuition scholarship. The loan is available only for students who are taking a course in a government recognized institution. The minimum loan amount offered by SSS EALP is ₱30,000 per academic year. Similarly, the maximum loan amount can be ₱100,000 per academic year. To apply for this loan, the borrower has to visit the SSS educational assistance loan program online or submit a copy of their application form to the nearest SSS branch.
Private or non-government institutions
Not all students are eligible for government sponsored loans, due to which they will have to rely on private institutional loans. Some of the options available are listed below.
Security bank personal loan
If you're a student or a parent looking for a means to sponsor your children's college education or a postgraduate study, you can access a multi-purpose loan from the Security Bank. To qualify for this loan, the borrower must be a Filipino citizen whose age is between 21 – 65 years. If the borrower is employed, their minimum gross monthly income should be ₱15,000 if they are living in Metro Manila and ₱12,000 if they are living outside Metro Manila. If the borrower is self-employed, they must own a business that has been operational for at least 2 years, with a minimum gross monthly income of ₱100,000. Here, the minimum loan amount is ₱ 30,000 and the maximum loan amount is ₱ 60,000.
To apply, the borrower has to fill out the application form. If they are employed, they will just have to provide one valid government-issued ID. However, if they are self-employed, they have to provide any of the following documents:
-
Identity of employment and compensation of not farther than 6 months or current payslip or ITR;
-
Audited financial statements for 1 year;
-
SEC registration;
-
Business permit;
-
Bank statements for the last 3 months.
With all the documents ready, the borrower can apply online via the bank's loan application portal.
InvestEd Student Loan
InvestEd offers loans to students to finance their educational expenses and also coaches borrowers on the best practices to manage and pay back their loans. To qualify for this loan, the student must be a Filipino citizen of 18 years and above. They must be enrolled in any government recognized institution and should be in the last two final years of college. The loan amount ranges from ₱10,000 to ₱100,000 per academic year.
Borrowers can apply for InvestEd student loan online by submitting an application. Just open their official website, search for student loans, and click on Apply now. After that, you will be required to present all the needed information. Once you have entered all the details, just click on Submit and wait for a confirmation.
BDO Personal Loan
Banco De Oro (BDO) offers a multi-purpose personal loan that can be used to finance the educational expenses of the borrower or their children.
To be qualified for this loan, the borrower must be a Filipino citizen of at least 21 years and above but no more than 70 years. BDO offers a minimum loan amount of ₱10,000 and a maximum loan amount of ₱1,000,000.
To Apply for BDO personal loan, the borrower can submit a loan application in any BDO branch close to them. Furthermore, if the borrower is residing or working near any active BDO branch, it can have a positive impact on their application.
How to repay a student loan debt
For repayment, you should know how much you owe and what your monthly payment and interest rates are for each loan. After that, find the best repayment schedule, one that's either fast or slow for your situation. Look into payment options that can whittle down your debt, such as paying more every month.
-
Enroll in autopay. If you subscribe for autopay, the government student loan provides a discount in the interest rate quarterly. The same is with some private lenders as well.
-
Pay off capitalized interest. Interest will accumulate during your schooling period unless the government subsidizes your loans, due to which it is necessary to make timely repayments.
-
Stick to the standard repayment plan. Federal student loans are usually set on a 10 years repayment plan automatically, except you choose otherwise. Ensure to stay with the government standard repayment plan if you know that you cannot make big extra payments.
All the loans can be paid via their supported payment methods. The borrower can learn more by accessing their lender’s official website. The commonly supported methods include leading online wallets, e-banking services, and also physical over-the-counter deposit methods.
How many years does it take for student loans to be forgiven?
The government offers several student loan forgiveness programs for enrolled students. For example, a student loan can be forgiven in exchange for a qualifying service or after you make quality repayment of the education loan for a couple of years. Below are situations that warrant to the forgiveness of a student's loan:
-
Income-based repayment. If you are a new borrower, your student loan will be forgiven after 20 years. Else student loan forgiveness will occur after 25 years.
-
Pay as you earn. If you're paying as you earn, then after 20 years your student loan will be forgiven.
-
Revised pay as you earn. If you're only repaying undergraduate loans, forgiveness will be available after 20 years. However, if you're repaying from a graduate school, then forgiveness is only possible after 25 years.
-
Income-contingent repayment. Student loan forgiveness is available for a student loan after 25 years of making monthly payments. If you still have a balance left after two decades of repaying your student loan, then your loan can be forgiven. Be aware that even if you are exempt from paying the principal balance of the loan, you might likely be paying taxes to cover up the balance.
Pros and cons of student loans
If you're trying to make a decision whether to apply for a student loan to aid your educational expenses, then you should put into consideration its advantages and disadvantages. Below are some of the pros and cons of a student loan you need to know know before making your decision.
Pros
-
Student loans let you afford college. Student loans make college education possible for financially-challenged families. They serve as a financial aid to students in funding for their school fees, projects, and other educational expenses.
-
Student loans can be useful for additional expenditure. Education loans can be used for other things besides direct expenses like tuition, room charges, etc. For example, an education loan can be used for buying textbooks, laptop, software, or paying for summer classes. Those are very important needs for a college student, and student loans can help ease the burden of getting them from you and your family.
-
Helps you build credit. Student loans can help the borrower in building a good credit rating. It's true that most of the people applying for a student loan do not have debts to their names, so they can actually begin to build a credit history with student loans. This credit history can help them in future.
Cons
-
Student loans can be expensive. As it is with every loan, student loans are also repaid with interest as well, and they can become very expensive in the long run.
-
Indebtedness. Getting a student loan for your college education means you are starting out with adulthood in debt.
-
Putting other life goals on hold. If you have a substantial amount of a student loan debt, you might not be able to start pursuing other financial goals or getting a new loan until you’ve finished paying off your debt.
Legal regulation of student loans in the Philippines
The Bangko Sentral ng Pilipinas, established on July 3, 1993, is the central bank of the Philippines, that provides legal regulation of student loans in the Philippines. It supervises and oversees the operations of banks and exercises regulatory powers over student loan interest rate.
The Bangko Sentral ng Pilipinas set an interest rate cap on all student loans. It approves a maximum of 6% interest rate for loan amounts not more than ₱10,000 with a repayment plan of four months and an interest rate of 5% monthly in the case of late payment of the loan.
The Bangko Sentral ng stepped into student loans applications in order to regulate the interest rates. Regulations by the Bangko Sentral on these loans were developed to promote financial stability. Supervision over bank operations by the Bangko Sentral is pertinent to check and control the operations of financial institutions in performing their functions.
The real cost of a student loan
Student loans from the federal government usually come with origination fees and different types of interest, which affects the real cost of the loan amount. These are the factors that determine the real cost of a student loan:
-
Origination fees. This refers to the one off fee you have to pay to get the loan. All government loans whether subsidized or unsubsidized issued directly to students usually have these fees, and they are always around 1% of the loan amount. For example, on a loan amount of ₱30,000, you will owe extra ₱300 with an origination fee of 1% or ₱1,500 with an origination fee of 5%. Private loan lenders do not have these fees.
-
Interest rates. Interest rates are what the lender charges you to borrow the money, and they come with both federal and private student loans. Once you receive the money, the interest starts accumulating even though you have to start repayment after graduation. This is why your loans will grow bigger than what you initially got.
Conclusion
One of the resources available for students with low financial abilities to help facilitate their college education is the student loan programs. Government issued-loans and loans from private lenders both have their pros and cons, the choice you make totally depends on your situation. Loans offered by private lenders, credit unions, or banks require a credit check just like any other kind of loan.
Legitimate student loans in the Philippines can help you to continue your college education and focus on your studies instead of worrying about how to fund it, so do not allow your financial situation to stop you from achieving your goals of getting a higher college education.
