Education is crucial for many career choices. Although there have been highly successful people that dropped out of college (e.g. Steve Jobs), a degree does benefit most people. Post-secondary school isn’t cheap and many need to take out loans in order to reach their goals.
Student debt is so common that most people do not realize how vital it is to pay it off in a timely fashion. It is also not uncommon to see student debts reaching £30,000. The average student debt in England this year is £20,100. It’s very important to pay off your debt as soon as possible, so be responsible in terms of debt management.
Once you leave school, you will have all kinds of expenses – rent, bills, food, car payments, and much more. It can become overwhelming, so most people are making the minimum payment. This is a problem, as former students are not aware of their debt. I suggest you look into your student debt and see how much interest it is accumulating. You should also look at the current timeframe regarding your repayment.
Managing Your Student Debt
As mentioned, it can seem like your student debt is not a priority, but you do not want it to follow you for thirty years. This is what is occurring for many former students, who will end up loaning much more than they intended to with interest costs.
1. Start to Prepare a Budget
This is not only beneficial in terms of your student debt, but all aspects of your finances. Properly budgeting is so easy to do, yet very few people put a realistic budget into action. You need to create a budget that is balanced. Your outgoing purchases can not exceed your income, fairly simple right? Well, in the world of credit cards and overdraft, this is not always the case.
Keep yourself organized within Excel or in a notebook dedicated to your finances. Right out every expense you have; rent, transportation, food, debt repayment, entertainment, clothing, gifts, travel, and any other expense you may have. Then calculate your average monthly income. Write how much will go where, so you have a visual on where your money is going.
2. Start Taking Control
Whatever you have left over, put towards your debt. It may be more appealing to buy a new wardrobe, but paying off your loan quickly is so beneficial. Debt creates a lot of stress for many individuals. You can eliminate this stress by making a conscious effort in terms of your budget. If you’re not making enough, you will need to cut back or figure out a way to make more money.
Start looking at costs that are extremely unnecessary. For example, look at bank fees. Have you been paying x-amount for something you don’t even need? Look exactly where your money is going and how you can trim it. Do you need the current mobile service you have? Can you cut the cost somehow? Even if it’s only £10 a month, that’s £120 per year. That is just one expense. If you trim multiple expenses, you can potentially put an extra £500+ towards your loan each year.
3. Borrow Responsibly
If you’re still in school or thinking about going back to school, only borrow what you need. The common problem is spending one’s loan on anything and everything that isn’t school related. All of a sudden you’re £20,000 richer. Remember, you do not technically own this money. Only borrow what you need to cover your expenses for school.
If you’re living away from home, you may have extra expenses. Food is a large cost and can be cut substantially as long as you plan accordingly. You do not need to sacrifice healthy meals, just be smart about what you’re making. Get involved and learn how to cook. A stir-fry for instance costs very little and provides you with essential nutrients. If you eat out a lot, this is a large expense.
Consider getting a little part-time job so that you do not need to borrow money for your living expenses. There are many ways you can make money during school. Look into tutoring local kids or sell some of your stuff that’s just sitting around.
4. Register and Keep Track
In England for example, you need to register with Student Finance England. Once you have done so, you can keep track of your loan and what payments are required. Checking your balance is important as it motivates you to put money towards your debt.
Once you have registered, you can also keep track of where your payments are going. You can see how much is going to interest and how much is going towards your loan. Watching your loan decrease is encouraging. This is a debt that should not be ’out of site, out of mind.’
5. Understand Your Options
There are various options offered that many are not even aware of. Speak to a financial advisor or school counsellor if you’re still attending school. If not, contact your loan provider. See what options there are if you’re struggling to make payments.
You can find student debt resources at the GOV.UK website. Use the ’Student Finance Calculator’ so get an idea of what help is available to you. You can also find out further information through Student Loans Company.
Depending on your country, you may have different options. In Canada for example, you can apply for repayment assistance. Depending on your circumstance, your payments may be lowered or the government will pay your interest for you. Look into what help is provided by directly contacting your loan provider.
Your loan should not be ignored. Think about how much better you will feel when you know that your student debt has vanished. You can focus on moving forward; buying a home, raising a family. The payments that you would have been making towards your debt, can go into a school fund for your own children. Start making smart choices regarding your money, paying debt off quickly.
Once you have your loan paid off, you will feel a sense of relief. Going back into your budget, you’ll have your ’student debt’ category set at zero. That means the money that was budgeted towards your loan can now go towards a holiday or home renovations. Basically, get involved. Understand how your loan works and what the best course of action is. Take control and you will have your loan paid off in no time.