The student loan guaranteed by the state: A solution to finance your studies for the success of all
Once the baccalaureate is in hand, a student has to face many expenses related to his studies, and it is sometimes difficult to finance them in full. The student loan guaranteed by the state is one of the financing solutions for studying with peace of mind. Here are the specifics of this advantageous loan.
Objective of the student loan guaranteed by the state:
The expenses of the students are more and more important, and very often, the help of the parents as well as the student jobs are not enough to fully cover it. The student loan guaranteed by the state is a consumer credit that banks grant to students in order to finance their studies, and ancillary costs such as registration fees, accommodation, food, school materials etc ... without deposit of a loved one, nor means-testing. There is no proof to provide as to the use of the funds of this student loan. Repayment can be deferred after graduation, i.e. the borrowed capital begins to be repaid only at the end of the defined period, which most often corresponds to the end of studies.
Who can benefit ?
In order to be able to access the student loan guaranteed by the state, the student must meet a few criteria:
- The student must be enrolled in an institution in United States in order to prepare for a French higher education diploma, whether it is a university, a business school, an engineering school or a high school as part of the preparation of a BTS. The bank will ask for proof of registration.
- The student must be over 18 and under 28 on the date of the loan
- The student must be of French nationality, or have the nationality of one of the member states of the European Union or of the EEA (European Economic Area). For citizens of member states of the European Union, it is necessary to provide proof of uninterrupted residence in United States for at least 5 years.
There is no means test for taking out the state guaranteed student loan.
The state as guarantor:
To take out this loan, the guarantee of a third party is not necessary, it is the State which acts as guarantor with the partner banks and therefore assumes part of the risks, up to 70% in the event of default. of the borrower. The remaining 30% is taken care of by the banks. The management of this guarantee fund was entrusted to Oséo, which was renamed BPI United States in 2013, the public investment bank. A partnership agreement was signed on July 23, 2008 by the Ministry of Higher Education and Research and OSEO in order to encourage financial organizations to finance student life. The period of validity of this guarantee is 10 years from the date of the first payment of funds by the borrower.
Characteristics of the student loan guaranteed by the state:
The student loan guaranteed by the state is not a zero-rate loan, the interest rate is freely set by each partner bank and may vary depending on the type of studies pursued and the type of repayment chosen. The bank therefore takes into account the professional project of the student, his level of studies but also his field before granting him the loan. The interest rate is between 1.5% and 4% depending on the bank. The amount of the loan depends of course on the amount of training but also on the amount of remuneration provided for in the labor market. Indeed, with this student loan, the banks are betting on the future. A student in a business school or an engineering school can therefore hope to obtain a student loan with a larger amount than a university student. However, there are limits, as the maximum loan amount is US $ 15,000 per student. The bank can offer its own insurance to insure your loan, but the student can choose the organization that will insure it themselves. There are several insurance comparators that will help you compare the best deals. The bank may request death and disability insurance from the student in order to grant him the loan. Like all consumer loans, there are procedures to be followed concerning the prior information of the borrower, the establishment of the contract and the right of withdrawal.
The right of withdrawal allows you to have a reflection period of 7 days from the signing of the student loan contract. During these 7 days, it is possible to cancel the loan without explanation and without charge. All you have to do is send the bank a registered letter with acknowledgment of receipt.
How to benefit from the student loan guaranteed by the state?
The banks concerned by this loan are as follows:
- Société Générale
- Credit Mutuel
- Banque Populaire
- The Caisse d'Epargne
In 2010, these 5 banks agreed to be partners in the student loan system guaranteed by the state.
All you have to do is file a loan application with one of these partner banks. It is the bank which will then decide whether or not to grant the loan and which will define the conditions. The loan will be repaid on a deferred basis, that is to say that the student will start repaying the loan when entering working life. Be careful though, the bank can refuse to grant the student loan if it considers that it cannot be repaid, even with the guarantee of the state.
Repayment Terms :
As with the amount borrowed and the Overall Effective Credit Rate, the term of the state-guaranteed student loan may also vary. The minimum loan term is 2 years and can go up to 10 years, especially for long courses and for the largest amounts borrowed.
The repayment of the student loan can be done in two different ways:
- Partial deductible: the student will pay during the duration of his studies the interest corresponding to the amount borrowed, on a monthly basis, as well as the insurance premium if credit insurance has been taken out. The repayment schedule is defined in advance, and the repayment of the capital starts at the end of the borrower's studies.
- Total deductible: the payment of interest calculated on the loan amount is also deferred at the end of the borrower's studies. The student will only pay the insurance premium during his course. It is important to remember that the deferral of interest generates additional interest, and that the total cost of credit will therefore be higher than in partial deductible.
The total monthly repayment amount should not exceed 33%, which is the debt ratio. It is the bank that will calculate the total amount of reimbursement not to be exceeded, costs and insurance included.
The student loan contract must provide for the terms of early repayment of the loan. When finances allow, it is possible to repay all or part of the student loan early. You should still know that depending on the terms of the contract, the early repayment of a consumer loan may be accompanied by penalties, better known under the terms of IRA or IFRA. Do not hesitate to carry out simulations in order to check whether the operation is profitable or not.
Before embarking on a student loan, it is important to compare offers. Here are some tips to help you compare different loan offers:
- The Annual Global Effective Rate (APR): it gives a view of the total cost of credit, taking into account interest, application fees as well as insurance.
- Bank charges: They vary from one bank to another, some banks will charge administrative fees, and other banks will offer them to you.
Some banks are organized into independent regional funds, so there may be disparities between establishments. It may be useful to compare the offers of agencies in the place of residence and those in the place of study.
Banks may also have some advantages such as a free bank card, or preferential rates in certain stores or on certain services.
Some banks allow total or partial release of funds, which can be paid quarterly, semi-annually or even annually, this is the case, for example, of Société Générale.
According to the latest statistics from the ministry dated August 24, 2016, since 2008, 51,543 state-guaranteed student loans have been granted, for a total amount of US $ 430 million. On average, students borrow US $ 8,300 over 72 months, or 6 years, including a 2-year grace period between the end of their studies and the start of repayment.
The government-guaranteed student loan remains a credit, so you agree to repay it. It is therefore necessary to check your repayment capacities before committing yourself.