Smart tips on student loans

You should be proud to be able to continue your studies when there is so much competition for university or college places. As you enter this new stage in your life, you may be faced with many new expenses. The government's Student Finance Office (SFO) has a number of ways to help you with any financial problems.

Student financial assistance schemes mainly give support through grants or loans.

1. Grant: A grant is money given that you do not need to repay. A grant is mainly used to cover tuition fees and academic expenses. Whether a grant would be awarded depends on the financial status of your family.  You can ask the student affairs office of your college or university for the maximum amount of grant for the current academic year.

2. Loan: A loan has to be paid back, with interest and administrative fee (if applicable) also payable. There are different eligibility criteria under individual loan scheme. Please see the SFO website for details.

• Think carefully: Consider your needs and how much/how fast you can repay it. Although the interest rate for student loans is generally low, the repayment period is very long. Think carefully before you apply for a student loan, as it may affect your other financial plans, such as buying property or getting married. If you can afford to repay the loan earlier, do so to minimize interest expenses and annual administrative fees (if applicable).
• How much you will need: Make use of the SFO's "Calculator" to roughly work out the size of the loan you can have, and the repayment schedule of the loan.
• Remember the application deadline: Applications for various schemes are generally accepted at the beginning of each new academic year/semester. Complete your application form and submit it before the deadline, together with relevant documents.
• "SFO E-link"﹕Make use of the SFO's online service to submit application forms, check application status, view your repayment schedule or your repayment records.
• Be ready to repay: The repayment of student loans begin after graduation or completion of study. This will take up part of your salary as loan repayments every month.
• Keep track of the interest rate: Pay attention to the repayment amount for each installment as the interest rate for the non-means-tested loan schemes can change. Interest rate is set at the HKSAR Government's no-gain-no-loss rate which is set at a specific level below the average best lending rate of the note-issuing banks, plus a risk-adjusted-factor rate. The Director of Accounting Services will review the no-gain-no-loss interest rate by the end of each month according to any changes in the average best lending rate in the month and will adjust the rate with effect from the first day of the following month. And thus, interest rate of student loans may go up sharply during rate-hike environment and increase the monthly repayment amount of your student loan.
• Repay on time: Student loans come from public money. You must repay the loan on time as you have agreed and also because it is your social responsibility. Late repayments will attract surcharge or overdue interest. If you don't repay, legal action may be taken to recover the amount you owe and other charges. This could affect your credit history. You can set up autopay to make sure you always repay on time.

Student loans are meant to give financial assistance to college/university students and help you to finish your studies, and not for anything else, such as making investments. The financial markets are uncertain and if you lose money on investments, you will not be able to repay your loan. If you want to learn more about personal finance, you can start by looking at the basics of managing your income and expenses, then get into the habit of saving. Only then should you start thinking about investments.