The Student Loan Goldmine

The Bank of Ireland recently announced an under-gradate loan system for a number of colleges. BoI also announced a post-graduate loan in conjunction with the Department of Education & Skills and National Treasury Management Agency (NTMA). The Bank of Ireland are on to a winner. Here we will explore the options open to Student Families and individual/mature students.

Undergraduate Loans

The cost of a 4 year under-graduate course in 2012 is €9,000 paid to the college, this works out at €2,250 per year, this is required by the college on a yearly basis.

Interest on the new BoI loan is charged at 5.1% (variable) during the period of the course, up to 5 years. Upon graduation 9.7% (variable) is charged on the remainder of the loan. Parents are required to pay €100 per month to the bank during the years of the college course and after graduation it is increases to €155 per month.

For example for a 4 year course a facility of €9,000 is provided by BoI. Interest is only charged on the amount drawn-down. The amount drawn-down is the amount the college receive from BoI, €2,250.

On the 31st of July, 2012 the Union of Students in Ireland(USI) point out a number of issues with the loan structure.

1. Mature Students and Students estranged from their families cannot gain access to the Loan facility
2. No provision for increases in Student Contributions.
3. Drop outs are transferred immediately to the graduate rate.
4. Future borrowing will be effected by the Student Loan.
5. No allowance provided for students taking a year out.
6. No announcement has been made for students taking 2 year certificate courses, 3 year higher degree courses and then on to a primary degree.
7. The loan does not cover other living expenses
8. BoI have not transferred interest rate cuts given by the ECB.
9. The loan must be paid 3 years after graduation, this may effect further student loans that the family may require in the future.
10. Repeat years and gap years are also not taken into account.

According to the Bank of Ireland

1. The Undergraduate Loan does not benefit the college in anyway other then the yearly contribution. BoI retain all the interest.
2. The amount of the loan is set in relation to the current student contribution, however parents may apply for an increase should the student contribution increase, BoI will consider such an application.
3. The loans are available to undergraduates Certificate and Diploma (Ordinary Degree) courses.
4. Students that drop out will be charged the standard graduate lending rate of 9.7% variable, and the loan will need to pay in full within 3 years.
5. Parents are not required to draw-down the amount each year. This will reduce the impact of repayments.
6. Students that go straight into a post-graduate course can apply for a post-graduate loan, as the undergraduate loan is to their parents.

It should be pointed out that refunds are provided to students that drop out of college. Colleges have a policy of refunding student contributions, less an administrative charge of 15%, if the student drops out before October 31st.

If they drop out before January 31st they will see their second semester student contributions returned, less a 15% administrative charge.

Repeat students are charged per credit that they are required to repeat.

The Post-Graduate Loan

The government has announced that post-graduate students would no long be able to apply for maintenance payments under the student grant scheme. With this in mind the Department of Education and Skills made provisions for a "Government-Backed Postgraduate Loan".

The loan will be provided by Bank of Ireland. The interest rate will be 10.8% for a one or two year post-graduate course. Interest only payments will begin immediately. Interest and capital payment begin 3 months after study ends. The repayment period can be up to 5 years depending on what best suits the student.

The loan is not for families, it is for students only. Students who received maintenance grants at undergraduate level may apply for €2,000 extra for living expenses.

According to the USI the loan does not take into consideration students that do not have a credit rating history, including those that still have no bank account.

Spreading the fees out

A number of colleges were contacted by CCÉ News in relation to finance arrangement for students with the colleges finance office. Payment methods to allow students pay for course as they are taken. E.g. a monthly rate of €250 or a weekly rate of €62 over nine months.

Most of the colleges contacted provided a facility for an in-full payment of €2,250 or two separate payments of €1,250 in term one followed by €1,000 in term two. Asked if they would consider a monthly payment, they stated that such payments would need massive investment and wouldn't benefit the student or the college.

Colleges deal with payments and student & staff records everyday, from Library entrances, health and safety records, role books, wages and many other day-to-day record keeping.

There are ways around such logistical issues, such as the use of the roll book, which is required for health and safety reasons. Most colleges have student card that feature a bar-code, this is often used to clock students in and out of the college libraries, again for health and safety reasons.

In Waterford The WIT Card can be used to pay for products in the college, could such a card be used to make weekly or monthly college payments?

College libraries use student cards to allow students enter the library and to take out books.

So the idea of monthly or weekly payment for any college fees or "contribution" is not as logistically impossible as colleges might perceive. Such a payment system could be built into systems that may need to be improved or implemented in the coming years.