Student loan application, drawdown and repayment – 6 frequently asked questions
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With a student loan, you can focus on your studies without worrying about money. Why should you apply for a student loan, and what should you know about it?
For many, a student loan is the first loan they take out themselves.
Nowadays the state takes part in the repayment of the student loan: if the loan applicant completes their studies within the time limit, they can get student loan compensation. In that case, Kela will pay part of the student loan.
You can easily apply for a student loan from your bank through OP's digital services.
To apply for a student loan, you need a valid state guarantee for a student loan, which higher education students receive automatically when granted a positive student financial aid decision.
An upper-secondary-level student must apply for the loan guarantee from Kela with a separate application when applying for a study grant and housing supplement. You can view Kela’s guarantee details in Kela’s digital service channel.
“You can apply for a loan from the bank immediately when the state guarantee for student loan has been granted. The bank receives information about the loan guarantee from Kela, so you do not need to deliver the decision to the bank separately. However, the guarantee does not oblige you to draw down the student loan,” says Henna Mehtonen, OP’s product manager responsible for student loans.
1. When should I apply for a new student loan?
According to Mehtonen, you should apply for a new student loan when you begin your studies, or when you need a student loan for the first time during your studies.
In later years, you can apply for an additional loan instalment.
“This way, you will only take out one loan for your studies, and all the loan instalments will be together”.
2. What does capitalisation of interest mean?
Capitalisation of interest means that the interest will be added to the loan principal instead of paying interest to the bank during your studies. During your studies, the interest on the student loan will be added to the loan principal every six months, in June and December.
“In practice, capitalisation means that interest will not be charged until you finish your studies,” Mehtonen says.
3. When do I have to start paying the interest on the student loan?
When you stop receiving student financial aid, the bank will capitalise the interest on the student loan for one more term.
“The bank will not charge interest on the student loan before approximately a year has passed since the end of your studies. If the student receives student financial aid in May for the last time, the bank will still capitalise the interest in December and begin to charge for the interest on the student loan one year later, in June,” Henna Mehtonen says.
She points out that the bank will remind those who have taken out a student loan on the payment of interest well in advance.
“You will have plenty of time to act”.
4. How should I choose to draw down a loan?
You can draw down a student loan in instalments determined in the guarantee decision – for example, in two instalments per year.
“The drawdown of a student loan is thus free of charge, and you won’t be charged drawdown expenses,” Mehtonen says.
If you do not wish to have the entire sum at once, or if you want to make a monthly schedule for drawing down your loan, you can also make separate drawdowns of your student loan. In such a case, you will be charged a small drawdown expense in accordance with the list of charges and fees.
5. When should I start making repayments?
The repayment of the loan principal usually begins usually about two years after the end of student financial aid. The repayment plan is created when interest is capitalised for the last time.
Henna Mehtonen points out that you can make changes to your repayment plan at this point.
“In that case, you should contact your bank as soon as possible. You can get a repayment holiday if you haven’t found employment in the first few years after your studies are over, for example”.
You still have to repay your loan, sooner or later.
“The state guarantee for a student loan is valid for 30 years after the first drawdown date of the student loan. On average, it takes roughly 12 years since the first drawdown date to repay a student loan,” Mehtonen says.
6. Do loans always include an origination fee?
You will be charged an origination fee when applying for a new loan or an additional loan instalment. For OP’s owner-customers, origination fees are free of charge when you submit the application through the online bank.
“Owner-customers should remember that a student loan also contributes towards OP bonuses. You can use the OP bonuses you have earned to pay insurance premiums and bank service fees,” Mehtonen summarises.
Use the student loan calculator to calculate how much you can receive as a student loan.
Podcast (in Finnish): Is it worth taking out a student loan?