Easing Student Debt
Students emerging from higher education are facing a completely different environment to when they started their studies. The world has changed from a free-spending high-unemployment one.
The promise that by becoming a student, you would find it much easier to get a job, rings increasingly hollow. Your degree will almost certainly help you in your career in years to come, but in the next two o five years, life will be tough. Some will be lucky to get into high paying jobs quickly, but most will have to start at the bottom.
You do not have to be a maths graduate to work out that the promise that if more than 50% of people leaving school went into higher education, that they would all get higher than average salaries. One recent calculation said that on average, new graduates would earn £100000 more than non-graduates. Sounds great, until you realize that it is over a fifty year working life and once you take out high earning doctors, lawyers and bankers- it equates to an average of £1000 a year.
New graduates and existing students have often been encouraged to get into debt by banks and organizations owned by banks. As well as student loans, they encouraged overdrafts, personal loans and credit card spending. Banks did this, as they know that the fist bank you use is almost certainly the one you use for the rest of your life. Now the world has changed, banks are getting tougher and wanting their money back.
Consolidating all your student debts into one consolidated loan is often promoted as an answer. But students are not the same as other borrowers, as there are complex rules on student loans. It varies, but the general rule is that if your earnings are lower than a set threshold, you can defer, reduce, or even in some cases completely avoid, paying off the loan.
You may still be tempted to consolidate all loans, or all loans other than the student loan, into one new amount. Consolidators encourage this as they make money, so it is not something to accept without looking wider than what a consolidator offers.
Consolidating debt is when you take out a single new loan to pay off several existing debts. Used carefully, a consolidation loan can help to put you back in control of your finances.
The advantages can include: paying a lower rate of interest over a longer, lower monthly payments, knowing when you`ll finish paying off the debt, a single payment each month, one lender and it may stop you falling behind on payments and getting a bad credit rating.
Possible disadvantages of consolidation loans include: if the loan is secured against your home-your property will be at risk of repossession if you can`t keep up your payments, you could end up paying more overall and over a longer period, extra charges for setting up and repaying the new loan, if you get into difficulties it may be more difficult to come to a new arrangement with a single lender and if you have a poor credit rating, you may only be able to get a loan at a high interest rate or secured against your home.
It is important you get independent advice to help you find the best way to deal with your debts. Not all debt advice is free and some organisations may charge a fee. Student loan debt is a good information source to start the search for expert help. They can help you work out the best way to deal with your debts.