Student loans: characteristics and types

What is a student loan?

Student credit: definition

The student loan allows them to have the necessary funds to finance tuition fees, housing, school supplies and other expenses associated with their university life.

In contrast to traditional loans, student loans often come with special conditions adapted to the students’ financial situation and needs.

A loan for studies

A student loan is a loan specifically designed to help students cover the tuition costs associated with their higher education.

A form of affected consumer credit

Legally speaking, a student loan falls under the category of granted consumer credit: the financier asks to know the allocation of funds (eg: purchase of movable property or services for one’s studies, purchase of computer equipment, etc.).

What are the different types of student loans?

Personal student loans fall into two main categories:

• Those guaranteed by the state.
• Those freely provided by banks (competitive sector).

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What are the conditions for getting a student loan?

Do a higher education

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

It must therefore be registered for the purpose of preparation for a certification, a competition or a French advanced diploma.

To qualify for study credit, you must therefore present a student card, a school certificate or proof of registration at a school or university.

Have French citizenship or residence card

Other conditions for obtaining and creating a student loan:

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

How many student loans can you take out?

No maximum number of loans for students

There is no strictly defined limit to the number of student loans a person can take out.

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

But beware of excessive indebtedness

Taking out multiple student loans can cause a significant financial burden once you graduate from school.

It is therefore important to plan carefully and ensure that the repayment conditions are clear.

How does student loan repayment work?

Deadline for repaying student loans

The duration 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 bank, but some banks may reject external applicants.

Borrowed amount

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

Student loans can cover part or all of the tuition and related expenses.

Repayment conditions for student loans

Student loans offer flexible repayment terms.

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

How do you 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, especially loans made in partnership with educational institutions or public organizations.

These loans are often subject to certain conditions, such as income criteria or academic performance, and may be linked to scholarships or specific assistance.

Find the right student loan

The annual percentage rate (APR), which includes all fees and other expenses associated with financing, is often less than 1%. Students must use this to compare offers.

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

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

A loan with a franchise period

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

However, he is obliged to pay insurance contributions every month. This formula is expensive because the interest that must be paid each year is added to the amount of borrowed capital to become even productive of interest.

Or a deferred refund

Other formulas allow for a partial postponement:

• Reimbursement begins during the student years, but only concerns interest and insurance premiums.
• The capital is repaid in a second step.

Deposits and student loans

Many banks offer cheap student loans to build a long-term customer base.

Before it is released, the bank requests guarantees from the borrower such as a guarantor or a bond.

Borrower’s insurance

Although it is not mandatory, the lending institution may request the subscription of borrower insurance.

With the same or close APR, it is generally preferable to choose the most flexible option because a student faces many uncertainties.

How do you get a government-guaranteed student loan?

The state-guaranteed student loan (PEGE)

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

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

To obtain conditions

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

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

You must still have proof of continuous legal residence in France for at least five years at the time of taking out the loan EU students can access it.

Partner banks

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

• Each partner brand has a limited number of loans for the year.
• They freely determine the credit’s APR. It is therefore advisable to bring in 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 excessive indebtedness.

Repayment of PEGE

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

• partially deferred (only interest is paid initially)
• postponed entirely at the end of the studies.

Repayments cannot be postponed more than ten years after the date of taking out the loan.

Online loan application

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

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

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

The interest rates for student loans vary from bank to bank.

In general, rates are competitive compared to traditional personal loans. Some loans may offer a fixed interest rate, while others may have a variable interest rate.

Indicative interest rates in banks

Student loan interest rates offered by banks are generally between 1 and 3% for fixed rate loans.

Some student loans can benefit from 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 prices, often close to traditional bank loans, with favorable conditions for students.

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