Education is no doubt an investment. But many find it difficult to raise funds for a college degree. Notes features a few financing options

A quality higher education doesn't come cheap. And despite part scholarships and discounts, a student might still find it difficult to pay his or her way through an undergraduate or postgraduate degree programme.

Many banks try to ease the burden through lending programmes specially tailored to meet students' needs.

Mohammad Al Shahed, senior student recruitment officer at the American University of Sharjah, has seen many highly-qualified students, who have met admission requirements, facing difficulties in paying their tuition fees.

Despite the grants and discounts offered by the university to outstanding applicants, Al Shahed said that some of them were still unable to afford the tuition fees.

In such cases the students' parents often look at education finance loans from one of several banks in the UAE that offer such packages. Among them are the National Bank of Abu Dhabi, Sharjah Islamic Bank and meBank.

Al Shahed said that financing education is a relatively new concept in the region. He added that some banks have begun offering such loans with an eye on the profits that can be made on the interest rate.

However, a carefully-used education finance loan can be a good investment, he said, particularly if the student joins a reputed university.

National Bank of Abu Dhabi
The National Bank of Abu Dhabi (NBAD) offers Student Banking, a special set of financial products and services that caters to students across the UAE.

"Our student package is designed to make life as a youth far more affordable and convenient with a wide range of built-in features," said Khalid Deemas, head of the retail banking group at NBAD.

One of the key products in this set is the personal loan launched in 2003 and aimed at financing education. According to Deemas, a student in the 18-24 age group can apply. A guardian's consent is mandatory if the student is below 21.

Deemas added that a minimum monthly salary of Dh2,000 for a UAE national and Dh3,000 for an expatriate transferred to NBAD is a requirement.

The maximum amount that can be taken is Dh250,000 and the maximum loan term for a national applicant is 108 months; 72 months for an expatriate.

Deemas also emphasised that irrespective of the loan amount, NBAD offers a competitive low interest rate starting from 9.25 per cent on a reducing balance basis.

"Due to the success of the various NBAD services specifically tailored for students, a second phase of the programme is underway," Deemas said.

Sharjah Islamic Bank
Sharjah Islamic Bank (SIB) offers three student financing products. Tamallak - which provides students with discounts on Toshiba laptops - the Islamic Affinity credit card for students and Shahadati. All three are based on the principles of the Islamic Sharia.

Shahadati, which was introduced in September 2004, can be used to finance both school and university education.

Mohammad Mousa, SIB branch manager at the American University of Sharjah, explained the application procedure for Shahadati. The application requirements differ for customers and non-customers.

A student, whose guardian earns a minimum monthly salary of Dh3,000 if he is a customer or Dh4,000 if he is not, can apply for the package. Mousa explained that the amount financed and the bank's interest rate are decided on a case-by-case basis.

The maximum amount provided for a customer is Dh250,000 and for a non-customer Dh50,000. UAE national customers are given a maximum of 72 months to pay back the loan, while expatriates are allowed a maximum of 60 months.

If the national is not a customer of the bank, he is given a maximum of 24 months to pay back the loan. If it is an expatriate the timeframe is 12 months.

meBank
The meUniversity programme offered by meBank was launched in 2003. Under the programme, students can not only avail of loans but are also provided with free bank accounts and credit cards. The bank has the same application criteria for both UAE nationals and expatriates.

Asiel Abed, meUniversity coordinator, said that students' guardians, or students who are at least 21 and hold a job with a minimum salary of Dh2,500 transferred to the Emirates Bank Group (EBG), are eligible for the education loans.

The guardian or the student applying must be working in one of the companies approved by EBG.

She said that the amount financed ranges from Dh10,000 to Dh250,000. Applicants are allowed a period of 12 to 48 months to pay the loan back. The bank charges a decreasing interest rate of 9.45 per cent.

Opportunities versus risks
Dr Yousuf Cader, an assistant professor of marketing at Zayed University, said that the increase in loan packages aimed at the youth can be attributed to the growth of the student population in the UAE.

"It has provided the opportunity for banks to expand their business by including the students as a target market for loans and to include them as their future customers with substantial earning potential," he said.

Cader added: "While there are opportunities, there will be some risks such as bad loans, but from observations of other markets in the world, these bad loans or the risk of non-repayment can be managed; banks are very shrewd when it comes to managing bad risks."

Cader believes education loans form a viable means of increasing a bank's market share. "Banks will have to come up with creative strategies that are different from their competitor's offer because there is no point in making the same offer as other banks," he said.

Some other options

  • The Dubai Islamic Bank offers education services and a payment scheme to cover university expenses.

    To apply, a UAE national applicant must show a minimum of six months' employment service - an expatriate must have one year's service - with government, semi-government institutions or private institutions acceptable to the bank.

    The loan can be repaid in 24 to 48 months.
    For more information log on to: www.alislami.co.ae
  • HSBC Bank also offers student borrowing solutions to cover education expenses. Applicants must be working to be eligible for a loan. The amount that can be taken and interest rates vary according to the company the customer works for.

    The loan must be repaid within five years.
    For more information log on: www.uae.hsbc.com
  • Citibank offers a college savings plan for parents to invest in a fund for their children's higher education in future.
    For more information log on to www.citibank.com

The writer is a mass communications student at the American University of Sharjah