After finishing high school, many young people choose to continue their studies and choose different universities and study programs. There are several universities in Latvia, and the range of study programs is wide enough for everyone to find what they want. However, one of the biggest problems faced by prospective students is the tuition fee. Higher education in Latvia is mostly quite expensive and the annual fee is often over EUR 1 500. Not all high school graduates have the job or savings that can cover this tuition, nor can parents afford it. Of course, state-funded budget places are also offered in Latvian universities, however, their number is small and not enough for all those who want to study; also study grants are the best. Thus, one of the possibilities is to use the study loan.
Loan for study
Since it is a long-term cash loan, you also need collateral – a guarantee or a collateral (real estate or securities). In the case of a study loan, if a guarantee is used, a state guarantee or a private person guarantee is available. Often, prospective students choose a parent or other person as a guarantor, but not always both parties fully consider what will happen if the student fails to make payments and actually has to get involved with the guarantor himself.
Thus, becoming a guarantor should not be careless, especially if the borrower is not a close family member. If the person using the study loan does not make the obligatory loan payments, the financial expenses have to be covered directly by the guarantor. However, if such a third party agrees to become a guarantor, she must also meet the criteria set by the creditor. The guarantor must be an adult citizen or a non-citizen of the state of Latvia with the residence permit, and the person must not be older than 65 years. One of the most important aspects, of course, is solvency, because it is impossible to become a guarantor if there is no job or regular income.
Income must be regular and at least one minimum monthly salary. If a person already has a credit obligation, it is possible to become a guarantor if the total monthly payments for the loans do not exceed 40% of the total income. A local government, not just a private person, can become a guarantor of a study loan without state security. It is also possible to get a study loan with a state guarantee, but even in this case a third guarantee is required. However, it is not possible to get such a loan in all banks – an auction is conducted every year, during which one bank is selected, which will be entitled to grant a study loan with a state guarantee. Recently, competition for this service has been reduced by banks, as, like other loans, there are debtors who do not make monthly payments. Thus, a long process is being carried out by the bank, which requires more than one expense.
Similarly, in recent years, fewer and fewer students opt for a study loan with a state guarantee – not all the state budget funds allocated for this purpose have been spent. A study loan with a state guarantee means that the state transfers the amount of money required from the funds allocated to cover the tuition fee of the higher education institution; the borrower himself does not receive this money in his account. In addition, every person wishing to receive a study loan with a state guarantee has a specific amount of funds that the state offers to pay.
A study loan is a loan that must be repaid only one year after the end of studies. Until then, it is only the interest on the loan, which is quite low, that has to be paid by the state, although these payments are made by the state. If a student leaves school faster, then the credit must start to pay off sooner than a year later. However, there are also various circumstances that may prolong the start of the repayment period, for example, if the borrower has a child born, is unemployed (up to 2 years); the loan does not have to be repaid if the borrower of the study loan is dead or has become a disabled group 1 or 2.
It is also possible to delete study credits if the borrower works in municipal institutions – 10% of the loan is canceled for each year of service. Changes are being made in this area. However, as one of the reasons why students do not choose to take a study loan with a state guarantee, there is uncertainty about credit expansion – every year a list of professions for which a study loan may be canceled in this way is created.