Some university students will graduate with a student loan debt and some are lucky enough to avoid it. However, if you fall in the former category, don’t despair.
The cost of higher education is skyrocketing, which makes it unsurprising why many students would turn to loans to finance their education.
According to YaleGlobal Online, the average student loan debt is US$37,000 in the US, GDP55,000 (US$69,633) in the UK, while students in Sweden, where tuition is free, leave with an average debt of about SEK20,000 (US$2,202).
Despite the gloomy outlook, it is possible to pay off your student loan debt and take that big step towards financial freedom.
Here are some tips to manage your student loan debt:
Get all the details
Firstly, if you can’t recall the details of your student loan, comb through your agreement or contact your loan provider to find out how much you have borrowed, what the interest rates are, and when your grace period ends – the devil is in the fine print.
It is vital to have this information at hand so you can start putting money aside towards your first few payments.
When it comes to student loans, ignorance is not bliss and won’t make your loans disappear.
Have a side hustle
If you are currently studying, consider taking a part-time job (or jobs) so you can put money aside to pay off your loan. However, whether or not you should consider this depends on your circumstances.
If you are already working part-time to support yourself through university, consider thoroughly whether taking up additional hours at work or additional part-time jobs will negatively affect your ability to cope with your school workload.
After all, there is no point skiving class if it results in abysmal grades. In the grand scheme of things, you may find yourself spending more money by having to repeat your classes and retaking exams, which would defeat the purpose of putting in additional hours at work.
Alternatively, if you are already working, there is no harm in finding a side hustle on top of your full-time job. You can use that income to pay off your loan more quickly.
Make the necessary monthly payments and be diligent about it
If you are already working, it may be tempting to spend a chunk of your paycheck on eating out, upgrading to an expensive phone plan or going shopping every other week.
However, if you want to pay off your student loans quickly, some sacrifices are in order. This may mean making lifestyle changes such as preparing more homecooked meals and spending less money on your vices. It may not seem like much at first, but after penning your daily expenses, you will learn that these seemingly small expenses can add up to a hefty amount.
It is important to organise your monthly commitments to ensure you not only channel funds into repaying your debt but also towards growing your savings. If money is tight, consider making the minimum payment for your student loan, while also ensuring you put aside some money for a rainy day.
Remember that you will want to pay your principal or you will find yourself merely paying the accumulated interests instead.
Pay more than the minimum payments
Again, this tip depends on your financial circumstances.
If you can afford to make more than the minimum payment each month, go ahead. The more you knock off the principal, the less you may pay in interest.
Alternatively, you can start paying before your grace period ends. The sooner you get into a habit of paying off your loan, the sooner you can finish it.
Have a backup plan
The truth is, not everyone secures a job by the time they graduate or by the time their grace period ends.
So, you may want to check with your loan provider about drawing up a plan to delay your payment if you have exhausted all other options.
Do note that while you may reduce your monthly payments by extending your loan, you will also pay more in interest in the long run and be in debt for a longer period.