It is said that one cannot put a price on a proper education.
Unfortunately, that is not quite true, as many students discover shortly after graduating when they have to start paying back student loans.
What might have seemed easy money initially can become a challenge very quickly as payments mount up, especially in an economy that might no longer be ravenous for graduates of every description.
Limit exposure
Of course, the best way to deal with debt is to avoid incurring it in the first place.
This might not be possible all the time, but where incurring debt is inevitable, there are ways to limit your exposure.
To start with, borrow only as much as you need, not the maximum you are able to.
Over the repayment period, even a small difference in the principal amount can make a big difference once interest starts adding up, so being as conservative as possible with your borrowing can be a big help.
Pick carefully
Be certain that you understand the terms of the student loan before you sign, as there is no going back once you have signed on the dotted line.
Compare the terms of various loan options, including the repayment terms, to see whether you would be able to pay it back. Also, be realistic when looking at your chances of getting a job once you graduate – will you have to job hunt or are you likely to be head hunted? What is your income likely to be? If your chances to not look good, be very wary of getting too deeply in debt.
Use your grace period
Many loans offer a grace period for anything from six months to a year after you graduate. Although you don’t have to make payments during this time, some loans will start accruing interest during the grace period, while others may not.
Regardless, any payments that you are able to make during this period will come off the principal amount, which means that once interest kicks in, your payments will be lower and will place less strain on your budget.
Also prioritise making extra payments on loans that start accruing interest immediately and those with higher interest rates, as your money will make a bigger difference there.
Be frugal
Most students subsist on a frugal budget, so once you graduate you might be tempted to blow your first paycheck on upgrading your lifestyle. Don’t.
Rather than making the first payment on a new car, push as much of your money as possible into paying off student loans.
Get a flatmate to help lighten rent costs, or where possible you might even consider moving back in with your parents for a couple of months (if they will have you) in order to put more of your money into getting rid of your debt.
Deferred gratification just after graduation is much easier than having to downscale your lifestyle later on due to a mountain of debt.
How to avoid debt in college
Forego the credit card. Stick with debit cards – that way your student won’t be able to spend money he/she doesn’t have, paying for it in interest for years to come.
Buy used.
Be smart with the Smart phone. Shop around for the best plan, as well as the best phone.
Play the host or pay the most. By buying groceries, cooking for several friends, and splitting the cost, your student can save both calories and money.
Think staycation. Staying on campus, going home (if it’s close) or camping are great alternatives to pricey breaks.
Get a job.
Power through. Summer classes, online classes and transfer credits often cost less than tuition costs at universities.
Related Videos
