When his daughter graduated from high school, Hani Shoukry thought of getting a personal loan to help pay for her university education. But after doing some research, he learned that various Egyptian banks offer another a financing tool he never heard of before: the “education loan”.
Shoukry, an employee at a private company, told Al-Fanar Media that the expenses of his daughter’s basic education had burdened him, especially because of private high school tuition. The family then had to be ready for her university education, with its double costs, he said.
A person applying for an education loan has to meet specific conditions. They must have a fixed income, and between the ages of 21 and 60. Moreover, the loan should be repaid within 84 months, making it different from a personal loan that has to be repaid within 60 months at most.
A bank employee told Shoukry he could get an education loan with a maximum of 300,000 Egyptian pounds ($15,600), at an interest rate slightly lower than that for a personal loan.
Egyptian Banks Offer Education Loans
A number of banks in Egypt grant education loans, including Banque Misr, the Commercial International Bank (CIB), Emirates NBD, Qatar National Bank, Egyptian Arab Land Bank (EALB), Al Baraka Bank, and Egyptian Gulf Bank.
Education loans at Egyptian banks tend to have interest rates lower than those for personal loans, and borrowers generally can take longer to repay education loans. Banks may differ on the exact terms, however.
Mohamed Hussein, an official at Banque Misr, says that the bank grants an education loan to customers whose monthly salaries are transferred through the bank, with an interest of 9.7%. The maximum loan amount is 300,000 Egyptian pounds and it should be repaid within 84 months.
“For loan applicants who are not clients of the bank, the interest rate will be 10.5%, with a maximum of 200,000 Egyptian pounds,” he told Al-Fanar Media. “It should be repaid within 48 months only.”
Certain documents are required to obtain an education loan, Hussein said: “It is necessary to bring a copy of a valid national ID card, an original utility receipt at the customer’s residence, an approved statement of school expenses, and a certificate of the monthly salary.”
For self-employed people and commercial and industrial professionals, they should present a copy of the tax card, a profession permit, a recent official extract from the commercial register, a six-month bank statement, or an income certificate from an accountant certified by the Central Bank, or Egypt’s Society of Accountants and Auditors.
The conditions for education loans of most banks are identical, with interest rates ranging between 9% and 10%. That is lower than the interest rate on a personal loan, which currently ranges between 11% and 12%.
How Do Banks Offer Education Loans?
Al-Fanar Media contacted several banks that offer education loans to learn about the conditions and advantages of each.
Al Baraka Islamic Bank’s education loans offer additional advantages, as it is possible to pay the tuition fees for more than one student during the due dates for tuition fees in schools and universities. The bank issues a bank check in favor of the university or school, with a maximum limit of 250,000 Egyptian pounds.
The Egyptian Arab Land Bank (EALB) provides an education loan with a maximum of 300,000 pounds, and a repayment period of up to 78 months. If the client’s salary is transferred through the EALB, there will be no requirement for a guarantor, and the loan is disbursed at the beginning of each semester by paying the required amount to the education institution.
The Egyptian Gulf Bank grants education loans in two ways; by financing either a full academic stage, or a single academic year. The loan might hit one million pounds, and repayment periods range from six months up to 96 months.
“Implementing education loans in Egypt should follow the Western style, with loans to be granted to students, not parents, with a pledge to repay the loans after the student graduates and secures a job.”Omneia Helmy Professor of economics at Cairo University.
The Emirates NBD Bank grants an education loan at a lower value than other banks, which is 100,000 pounds, which should be repaid within 36 months only.
Qatar National Bank (QNB) finances educational courses, mini-Master of Business Administration degrees, M.B.A.’s, other master’s and doctoral study programmes, as well as university and school levels. The loan can cover up to 95% of tuition fees and book expenses, and should be repaid within 48 months. The load cannot exceed 500,000 Egyptian pounds.
In addition to the education loans, there are other ways to finance students’ education, such as the Micro-Education Project offered by some insurance companies through government and private banks in Egypt. This project is based on the parents or guardian saving a monthly sum, for fifteen years, for example. Starting from the third or fourth year of saving, the insurance company pays the school fees for the student, and in the end, the student receives a sum of money to help him or her cover their university expenses
Omneia Helmy, a professor of economics at Cairo University, says education loans from banks are an American-European idea. In the West, such loans help students complete their education, then start repaying their loans after securing suitable jobs. In principle, this is a “win-win situation,” she said. Everyone wins, Helmy said: students, banks, and society.
“Implementing education loans in Egypt should follow the Western style, with loans to be granted to students, not parents, with a pledge to repay the loans after the student graduates and secures a job,” Helmy said.
“The interest rates should be low, in order to encourage students to learn, and to be well-qualified for the labour market,” she told Al-Fanar Media.
Helmy explained that some Egyptian banks offer savings vehicles and soft loans to educate children from primary school to university. “However, most people do not know about these systems that can help them cover education expenses,” she said. “I suggest disseminating information about this concept within efforts to expand financial inclusion, to inform everyone about it, and to benefit both families or banks.”
Helmy also cited a negotiation between Egypt’s Ministry of Higher Education and the Central Bank of Egypt, in March, about proposed solutions to provide financing opportunities for university education, especially in private universities. “That meeting was the beginning of an agreement that can be built upon,” she said.
(It should be noted that students in the United States often borrow much more than the amounts available to Egyptian families. The amount of student loan debt outstanding in the U.S.—$1.6 trillion—is considered a significant drag on the economy.)