The sordid topic of student loans – On the Money with Jarryd Neves

Jarryd Neves
On the Money. Budding stock market investor Jarryd Neves, of BizNews, sends out an invitation to everyone who wants to ask questions about share investing – but is too embarrassed to ask. Write to [email protected] And tune in for his regular Monday column: On the Money

It’s no secret that South Africa is a deeply unequal society. It’s evident in our everyday lives. Take our healthcare system, for example. Those who can afford it are lucky enough to be treated in a state-of-the-art hospital if (God forbid) something terrible should happen to them. The majority of the country, however, have to queue endlessly for medication – or wait months on end for simple procedures.

Our poverty gap is a telling sign, too. As vast as a canyon, over 35,000 High Net Worth Individuals (HNWIs) call South Africa their home. That, according to New World Wealth analyst Andrew Amoils, is more than countries like Portugal and Turkey. Despite this, millions of honest, hard-working South Africans live in abject poverty.

Another indication – albeit subtle – is the massive divide our country sees when it comes to education. In the leafy suburbs and wealthier cities, children are blessed enough to attend good schools – those formerly known as ‘model C’ schools or indeed, affluent private schools. For most kids, that isn’t the case.

It doesn’t change when looking at higher education. Fees are even more exorbitant, with many parents and children having to take on debt in order to finance their studies. This is more commonly known as student loans.

Graduating is a wonderful feeling. You’ve ‘unlocked’ yet another stage of your life, where you use the expertise and knowledge gained at university and apply it to your professional life. Starting that with debt is a stressful – but very necessary – burden for some. Many South Africans know the difficulty of getting a job, and it’s even more difficult without a degree.

Let’s look at some ways to tackle that student loan debt. First things first, sit down and review the loan. What do you actually owe? Not just the loan amount, but the interest and fees too. Once you know what you’re dealing with, it’s easier to tackle the challenge.

When you applied for your student loan, the terms and conditions would have undoubtedly been explained to you – what you own, your instalments, the terms, etc. Make it a priority to pay it off timeously and, if possible, make extra payments. Not only will this reduce your debt quicker, but it will encourage you to pay off the debt even quicker.

Another idea, which a personal friend of mine implemented, was paying the loan off as soon as possible. While she was studying, my rather industrial classmate did the very tricky thing of balancing her studies with a job. While it was immensely tough on her, she graduated with minimal student loans to pay off. Now, she’s free of debt. It may be tough balancing a part-time job with your studies, but it will pay off (in terms of work experience and student loans).

If it’s too late for the last idea, a second job or ‘side hustle’ is a neat way to bring in extra cash. Try to think out of the box and leverage your skills to make you more money. Volunteer to tutor students or school kids in a subject you’re skilled in, use a skill to create items people would want to buy, or even sign up to be an Uber driver/delivery person on weekends. Again, this doesn’t suit everyone. You may simply not have the capacity to do this.

As mentioned last week, trimming from your budget is also a great way of saving money, and this can be channelled into your student loan. Skipping out on that weekly dinner with friends could be an extra R300 a month that could be reducing your debt. If that’s something of value to you, consider looking elsewhere. For example, do you really need both Netflix and DSTV?

Lastly, go easy on yourself. While debt is a burden no one wants, it is sometimes a necessary evil. You didn’t need a loan for a lavish car, frivolous credit card bills, or something similarly vapid. Education is essential. Quite simply, student loans are an investment in yourself that you will slowly pay back. Just use it wisely.

Rocco van Zyl* of Brenthurst Wealth Management shares his expert advice by providing answers to your investment questions.

Nawal asked,

I’d like to know how I can begin a small investment portfolio. But what should I choose? Is there someone I should follow?

Rocco answers,

As you did not define what your definition of a ‘small investment portfolio’ is, I cannot provide extensive detail – but excellent news that you want to start investment. A lot of factors need to be taken into consideration, however, the main goal when starting a small investment portfolio is to add to it on an on-going basis. Great if you have a lump sum to start with, but contribute to it regularly to slowly grow the investment.

Time is a very important factor. The effects of compounding can never be taken for granted, especially when you are looking at a long-term investment. Another important consideration are the fees associated with your investment. You should look to minimise the fees as much as possible as they can have an eroding effect on your capital.

Be sure to understand your risk profile. The markets can be volatile at times and you need to know how to navigate the volatility. If you want to buy shares directly, review platforms like Sharenet or EasyEquities. To spread your risk and gain wider exposure to different companies in different industries, do consider starting with low-cost exchange traded funds (ETFs). These funds offer excellent diversification and generally offer relatively low fees.

Have a question about share investing? Write to me at [email protected].

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