Student loan: characteristics and types

What is a student loan?

Student loan: definition

Student loans provide students with the funds needed to finance tuition fees, housing, school supplies and other expenses associated with their university life.

Unlike traditional loans, student loans often come with special conditions tailored to the students’ financial situation and needs.

A loan for studies

A student loan is a loan specifically designed to help students cover the cost of attending college.

A form of earmarked consumer credit

Legally, a student loan falls into the category of earmarked consumer credit: the financer asks to know the allocation of the funds (e.g.: purchase of movable property or services for studies, purchase of computer equipment, etc.).

What are the different types of student loans?

Student personal consumer loans fall into two broad categories:

• Those that are guaranteed by the State.
• Those freely granted by banks (competitive sector).

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What are the conditions for obtaining a student loan?

To pursue higher education

Any student can apply for a student loan provided that their studies are recognized by a diploma or a French higher education competition.

It must therefore be registered with a view to preparing for a certification, a competition or a diploma in French higher education.

To apply for a student loan, you must therefore provide a student card, a certificate of education or proof of registration in a school or university.

Have French nationality or a resident card

Other conditions for obtaining and setting up a student loan:

• be of French nationality;
• reside in France for at least five years at the time of subscription;
• be a national of the European Union or a member state of the European Economic Area (EEA) with two years of uninterrupted residence in France.

How many student loans can you take out?

No maximum number of loans for students

There is no hard and fast limit on the number of student loans an individual can take out.

Please note that students have a right of withdrawal of 14 calendar days.

But beware of over-indebtedness

Taking out multiple student loans can result in a significant financial burden once you graduate.

It is therefore essential to plan carefully and ensure that repayment terms are manageable.

How does student loan repayment work?

Student Loan Repayment Deadline

The length of a student loan varies, often between two and ten years.

Please note that the student does not necessarily have to already be a customer of the banking establishment, but some banks may refuse external applicants.

Amount borrowed

The amount borrowed depends on individual needs and the conditions offered by the banks.

Student loans can cover some or all of the cost of tuition and associated expenses.

Student Loan Repayment Terms

Student loans offer flexible repayment terms.

• It is common for repayment to begin after the end of studies or after a grace period defined by the loan contract.
• This grace period allows borrowers to find employment and stabilize their financial situation before beginning to repay the loan.

How to get a student loan from the banking sector?

A zero-interest student loan

Some student loans offered by banks benefit from a 0% interest rate, particularly loans granted in partnership with educational institutions or public bodies.

These loans are often conditional on certain conditions, such as income or academic achievement, and may be linked to scholarships or specific aid.

Finding the Right Student Loan

The annual percentage rate (APR), which includes all fees and incidentals related to financing, is often less than 1%. This is what students should use to compare offers.

The entire loan can be released at once or gradually, in several stages, depending on the student’s needs.

Interest begins to accrue from the time the funds are paid.

A loan with a grace period

Student loans, with an average amount of around 20,000 euros, come with a grace period: repayment of the capital and interest only begins when the student enters working life (total deferral).

However, he is required to pay insurance contributions every month. This is an expensive option, as the interest due each year is added to the amount of capital borrowed and becomes interest-bearing itself.

Or a deferred refund

Other formulas provide for a partial deferral:

• Reimbursement begins during the study years, but only covers interest and insurance premiums.
• The capital is repaid in a second stage.

Student loan and security deposit

Many banks offer low-cost student loans to build long-term customer relationships.

Before releasing it, the bank asks for guarantees from the borrower such as a guarantor or a surety.

Borrower insurance

Even if it is not obligatory, taking out borrower insurance may be requested by the lending institution.

At equal or close APR, it is generally better to choose the most flexible formula, because a student is faced with many uncertainties.

How to get a state-guaranteed student loan?

The state-guaranteed student loan (PEGE)

If the student does not have a guarantor or proof of income, it is possible to obtain a state-guaranteed student loan (up to 70% of the capital borrowed).

This funding is available from May to September in preparation for the next academic year.

Conditions of obtaining

With a minimum duration of two years and a maximum amount of 20,000 euros, this guaranteed student consumer loan is open to all students:

• French under 28 years of age without parental or third-party guarantee (this loan is also available to minors over 16 years of age who have been emancipated by their parents);
• enrolled in a university, a business or engineering school, in a BTS, etc.

It is still necessary to provide proof of uninterrupted regular residence in France for at least five years at the time of conclusion of the loan; EU students can have access to it.

Partner banks

The guaranteed loan is distributed by State partner banks (Banque Postale, Banque Populaire, Caisses d’Épargne, CIC, Crédit Agricole, Crédit Mutuel, Société Générale).

• Each partner brand has a limited loan amount for the year.
• They freely set the APR of the credit. It is therefore advisable to play the competition.

This system does not create a right to credit for students. Partner banks may refuse to grant the loan despite the State guarantee to avoid situations of over-indebtedness.

PEGE reimbursement

The loan amount (principal + interest) must be repaid, but this repayment can be:

• partially deferred (only interest is paid initially)
• deferred completely until the end of studies.

Repayments cannot be deferred beyond ten years after the date the loan was taken out.

Online loan application

Before contacting the bank, you should request a pre-eligibility certificate online, on the dedicated platform.

The application for a state-guaranteed student loan is then made directly to the partner banks. The bank will then connect to the platform to ensure that the information is compliant.

What is the interest rate on a student loan in 2024?

Student loan interest rates vary by banking institution.

Generally, rates are competitive with traditional personal loans. Some loans may offer fixed rates, while others may have variable rates.

Indicative interest rates in banks

Interest rates for student loans offered by banks typically range from 1% to 3% for fixed-rate loans.

Some student loans may qualify for a 0% interest rate, including loans provided by certain banks in partnership with educational institutions.

Indicative interest rates for state-guaranteed loans

These loans offer competitive rates, often close to those of traditional bank loans, with advantageous conditions for students.

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