How To Deal With Debts From Your Education
Students and those who have left university are well aware that university fees, student loans, and accommodation fees can soon mount up. Debts from your education can last for long after you have left college or university and some, but not all, will incur interest. So should college and university debts be paid off as soon as possible, or does waiting make more sense.
Student LoansYou will probably never get a better deal on a loan agreement than you did with your student loan. Student loans provide low interest rates with a deferment period if you are not earning above a certain amount once you become employed. Although this sounds, and is, a great loan deal, the prospect of leaving university with around £20,000 worth of debt can be seriously stressful.
Paying Back Student LoansAt the moment, if you earn more than £15,000 once you have left university then you can no longer defer your student loans. Interest rates on student loans are based on the rate of inflation. However, even though you are able to borrow a lot more money under the new student loan system, you will need to pay it back a lot quicker. The loans will be repaid from your salary at a rate of 9% interest and there is basically nothing you can do to stop this.
To Pay Back or NotIf you are looking to become debt free and trying to eliminate your debts one by one, then student loans should be the last one to be paid. Pay off high interest debts such as credit cards and bank loans first. Your student loans are relatively very low interest and should be the last debts to be cleared.
Taking a Payment BreakNew ‘payment holiday’ rules have come into play regarding paying back student loans. If you are due to start paying your loan after 2012 you do have the option of taking a payment holiday of up to five years.
Graduate LoansGraduate loans will usually be offered by banks and building societies and allow students to merge all of their existing loans and overdrafts into one graduate loan. The interest on these loans begins when graduates are earning a salary, and the interest is usually low or about average compared to normal bank loans. Repayments terms will usually be the same set amount each month and it is in your best interest to shop around and get the best deal that you can.
Student Loan Write OffUnder certain circumstances student loans will be written off. When you reach the age of 65, your student loan, if taken out before September 2006, will be written off. Loans taken out before 1998 will also be written off after 25 years. Loans are also terminated if you are deemed permanently unfit to work. Student loans, whether you are paying them or deferring them will not usually be marked down with credit reference agencies, and as such, should not have any relevance on future borrowing.
Credit CardsStudents will not usually be offered special interest rate credit cards. If a student does take out a credit card it will usually be the same amount of interest that all customers have. Interest on these cards will accumulate the longer the account exists, so it is always wise to pay off credit card debts before any other type of debt. Debts from your education can soon mount up if you have been financing part of your university life by using one credit card to pay off another.
Struggling with DebtsThe good news is that graduates usually earn a larger salary than non graduates but graduates also have a back history of student debts to pay off. If you are struggling to pay off debts from your education then you should seek advice from a credit counselling service. They will be able to give you the best options to suit your situation and will be able to contact creditors on your behalf.
If you attend university then debts from your education will need to be dealt with at some point in the future. But if you have found that since graduating university your job prospects have increased and your pay is above average, then in the long run, these debts can be looked on as an investment.