We all know that life as a student can be challenging, a lot more so financially. A lot of students find it hard to keep up with the full brunt of academic activities and simultaneously handle making extra cash doing part-time jobs. It is due to this ailing need for financial assistance that has come to be rampant amongst students that the concept of student overdraft has arisen as a convenient solution. However, the student overdraft system is more or less a sort of loan and will have to be paid back. Let’s start with How Long Do I Have To Pay My Student Overdraft Back Santander.
Technically speaking, there is no deadline for paying off student overdrafts. After graduation, most banks allow up to 3 years before beginning to charge interest on any student overdraft loans that haven’t been fully settled. However, banks hold the right to demand the payment of any outstanding loans at any time. Read below for more details concerning this.
Deadline for Payment of Student Overdraft
As explained earlier, there is no fixed deadline for the payment of student overdrafts. Here’s how it works.
After graduating from college or the university, most banks help facilitate the conversion of a customer’s Student Account into a Graduate Account. With a graduate account, customers may enjoy such features as up to 3 years grace period for the payment of student overdraft. After this period of 3 years elapses, any outstanding student overdraft loans will then begin to incur certain significant interest fees, thereby making it even more difficult to cover the cost. As such, students/graduates are advised to make use of this 3 year grace period to fully settle all outstanding overdraft loans.
Furthermore, not all banks perform this service automatically. As such, after graduating, you should contact your bank to have them convert your Student Account into a Graduate one, rather than just assume that this would be handled. If your Student Account is not converted into a Graduate Account post-graduation, the result is that your student overdraft loans will begin to accrue interest, without the afforded 3 years grace period which is a unique feature of the Graduate Account.
What is a Student Overdraft?
The term overdraft means to overdraw from an account. To withdraw or spend more money than is available in an account. Used loosely, a student overdraft is a sort of loan, a privilege afforded to college and university students who may be financially ailing, to provide them with much-needed financial aid. A common feature of the student overdraft is that it is, in most cases, interest-free. This means that, for the most part, student overdrafts incur a 0% interest charge on loans.
Stages of Overdraft
To further deepen your knowledge about how the overdraft system works, here are two stages of overdraft you need to know about;
- Planned/Arranged Overdraft: This refers to having an ‘agreed/pre-arranged’ overdraft amount with your bank. What this means is that as the holder of that account, you are eligible for an overdraft sum of up to the pre-arranged amount. Also, most banks tend to allow a 0% interest charge on student overdrafts.
- Unplanned Overdraft: The unplanned overdraft, otherwise known as ‘unauthorized’ overdraft, occurs when;
- You spend over your account balance without first setting up a planned overdraft. When this happens, your account displays a negative balance in line with the amount you now owe. You will be charged interest fees when this happens.
- You spend past the agreed/planned overdraft amount. When you exceed your authorized overdraft amount, an interest charge is placed on the calculated exceeding amount. For example, if you have an overdraft of $1000 and you spend $1500, this means you have exceeded your planned overdraft by $500, as such, even if your bank offers 0% interest student overdraft, charges would be levied on that exceeding overdraft amount of $500.
Some Features of Student Overdraft
When fishing for a student overdraft program here are a few useful pointers you might want to consider
- 0% Interest: It is important to note that not all banks offer an interest-free student overdraft package. It would be advisable to get with a program that allows you to borrow money without having to do with large interest charges adding to your debt pile as this may prove counterproductive.
- Size of Overdraft: This is another important feature to note. You would want to look for a student overdraft package that grants enough to meet your needs, however, students are advised to exercise caution as getting a high overdraft amount may prove problematic as it may be a lot more difficult to pay back.
- Also, as a bonus, certain banks allow customers who partake in student overdraft certain benefits like; travel vouchers, cinema discount coupons, food or shopping vouchers, etc. In particular, Santander offers the following benefits:
- Free 4-year Santander 16-25 Railcard to save 1/3 on rail travel in Great Britain
- Up to 15% cashback with retailer offers, etc.
Conclusion
Having some extra cash around as a student is quite convenient. A lot of times students are tempted into regarding the overdraft as free money, however, you are reminded that it is, in fact, a loan that you will most certainly have to repay. As such, students are advised to exercise restraint in dipping into their overdraft funds, so that paying them back won’t prove too much of a hassle.