Dealing with your Student Debt

Dealing with your Student DebtThe majority of students will leave college with a heavy financial millstone around their neck. Is there anything they can do about this?

The statistics show that more and more students are graduating from college with significant debt. The debt levels are growing year on year and many students will be paying them off for years after they graduate. It seems that the consumer addiction to credit and spending has effected the student population just as much as every one else. Despite that most students are not earning anything, and are living either on funds provided by their parents, or on money borrowed, they continue to spend millions each year.

These costs are spread over a variety of areas. Accommodation and other living expenses represent the largest portion of the expenditure. Added to this is travel to and from university, holiday and summer travel expenses, and entertainment. While students are generally financially responsible and not as out of control as many parents would have you think, they do continue to spend a huge portion of their money on entertainment and socializing.

Let’s see if we can reduce the amount of debt we run up during the course of school in the first place.

Many students will be working part time during their studies. There are a lot of jobs available and finding one is not a problem for most students who genuinely want one. Employers recognise their flexibility and willingness to work unsociable hours and also that they will generally be happy to accept minimum or close to minimum wage. Therefore, while the jobs are there, they generally pay little, and students who work more than 10-20 hours a week are probably putting a serious strain on their studies and risking their future chances of success.

Most student debt is comprised of student loans. The student loans company based on eligibility criteria provides these. These loans are cheaper than credit that is available on the market from high street banks and have other significant advantages for students. Firstly, students will not have to start repaying the loans until they are earning a set minimum amount, currently around the $30,000.00 mark. Then there is also the fact that loan repayments are calculated according to earnings levels and are therefore always reasonably affordable. Students are giving as much time as they need to repay the loans and the interest rates, as said before, are very favourable.

As well as these student loans however, many students will also have other forms of debt. Most banks are offering interest free student overdrafts of up to $4,000.00 and there are not many students who do not use this up pretty quickly. Then there are bank loans, store cards and credit cards. All of these represent a significant amount of debt that most students are living with.

It seems that the writing is on the wall. The best solution is to limit spending and to make compromises in areas unrelated to your academic studies. Staying clear of consumer credit cards and high interest loans should be a priority. Keeping tabs on your spending, so not to over draft an account can also save a large sum of money.

With an average debt of about $20,000 USD, the college graduate has more debt than their parents. There are some additional funding sources that may be able to help some students, preventing them from incurring such an enormous debt in the first place.

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