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Coping With Student Loan Debt
Every college graduate seems to have a student loan debt these days. Considering the cost of average college tuition, as well as study books and apartment renting for those who have come abroad and don’t live in a dorm, it’s really not that surprising. We may not have it as bad as Americans do, but student debt in Australia is far from being a laughing matter. That’s why we’ve prepared these five simple steps that can help you start paying off that pesky student loan.
Take full advantage of the grace period
Depending on the type of loan, you have a certain grace period after you graduate. For example, you don’t have to pay your standard student loan in Australia until you hit a specific salary point. Once you do, the debt is gradually paid off by deducting a small percentage of your pay. Based on the amount of money you’re making, this percentage can vary from 3% to 8% of your monthly salary. Take that grace period seriously and start making a plan to pay off your debt. That said, just because you aren’t obligated to pay off your debt during that period, doesn’t mean that you don’t have to. It’s never too early to start paying off a debt.
Make a detailed assessment of your financial situation
One of the first steps in dealing with student loan debt is to do a complete assessment of your current financial situation. When it comes to student loans, you should know exactly how much money you owe, what kind of interest rates are associated with your debt and how high are they, the amount of money per month that goes towards paying it off and how long will it actually take. This assessment can be applied to any other kind of debt you might have.
Create a budget and stick to it
Once you’ve figured out how much money will go every month towards paying off your student loan, it's time to create a budget that will correspond to and incorporate those payments into your monthly earnings. Treat those payments like you would any other monthly bill and pay them regularly. If you’re not making enough money to cover them, try asking for overtime hours or getting a part time job. If you have a computer and an active internet connection, you might want to consider freelancing or selling items you don’t need online. Cut all your costs to a bare minimum for a while, it might be tough but it will only make you appreciate the money you’re earning and owning that much more.
Focus on the high-interest debt first
Having a massive debt, you have no idea how to return can be rather stressful, to say the least. That’s why most people get tempted to spend any extra cash they come up with on covering those debts. This isn’t necessarily a bad idea per se, but this money can be spent elsewhere while still paying off your debt like you usually do. What important here is to focus on those high-interest debts such as credit card or personal loans. The average student loan has around 3-4% interest rate, whereas personal and credit card loans have up to 25%.
Seek professional financial help
There are people who know how to budget and take care of their finances. There are those who tend to spend a little more than they should, yet still, manage to cover all the bills at the end of the month. And there are those who simply manage their finances even if their life depended on it. If you’re one of the later, then it may be a good idea to ask for professional help. There are numerous professional companies that deal with financial services which can help. These companies can help you deal with financial issues, tax planning, and appropriate strategies, budgeting and offer personal financial plans. Just be wary of scammers, especially when looking for one online.
For most young adults, student loans are nothing more than a practical necessity in order to finish a good college and actually get a job that pays well. Others may not have the financial constraint and simply view student loans as free money or something they can deal with once they finish college. Regardless of how people view them, student loans can place a significant weight on your shoulders which doesn’t go away and only get bigger if not handled appropriately.