The Importance of Conducting Student Loan Checks
In Indonesia, the term student loan may be a little unheard of. A student loan is a type of loan in which a person borrows money from the government, a bank, or a private lender to help pay for their college costs, such as tuition fees, supplies, books, and living expenses.
The borrower will have to begin paying off the loan once they obtain a job. During the job search period, borrowers can get 6 to 12 months before being asked to start paying off the loan every month after getting a job.
Student loan programs exist in more than 60 countries across the world. Its implementation is undoubtedly different based on the country, according to the regulations and conditions that apply to each region.
Low interest loans
Student loans are interest-bearing loans. However, the interest charged is normally quite low.
The average interest rate for student loans falls within the range of 1.86 – 13% per year. The interest rate depends on the lender’s policy, the loan ceiling, the borrower’s existing credit score, the type of student loans (subsidized or unsubsidized), general government policies, and also the repayment term.
Usually, student loans offer a repayment term between 5 and 20 years. Longer repayment periods usually come with higher interest rates.
Since it is a loan and not a scholarship, it requires the debtor to return the loan principal and interest according to mutually agreed terms. Later, the student loan amount will be recorded in the individual’s credit report.
Just like other credit regulations, the accuracy of the debtor’s commitment to repay the loan will affect the individual’s credit score. If they do not repay the loan and are in arrears, they will have poor credit scores.
Sanctions for bad debtors
Poor credit scores due to an inability to repay student loans is a given. However, some countries have tougher sanctions.
Sanctions that can potentially be enforced on those who are unable to repay their loans include a prohibition to travel abroad, difficulties in administrative matters, and the inability to obtain other forms of loans, such as mortgages.
To anticipate this, several countries have imposed strict conditions. One condition is that prospective debtors must have good academic grades, therefore increasing their chances of getting a job after their studies.
In addition, it is also vital to conduct student loan checks on your prospective employees. The purpose of this check is for the company to ensure the competence or ability of the candidates in managing their cash flow, whether there are indications of consumptive behavior, or whether there are arrears and other related matters.
As a provider of background checking services, Integrity Asia provides student loan checking services in Thailand and Malaysia. This service is intended for candidates who are in the recruitment process.
As we know, large amounts of outstanding debt that a prospective employee may have, including student loans, can potentially affect their performance. These checks can help reduce the risk of hiring candidates with financial problems.
ADT
