Uncommon Cents: Paying off student loan debt

You have worked hard, graduated or will graduate soon, and are ready to take on the world in a whole new way. However, one of the new ways in which the world will immediately confront you is debt. Here’s what you can do about it.

Don’t wait to deal with your debt. It will just get harder for you to pay it back if you ignore it. It will not simply go away. The debt will follow you until it is all paid up.

Athletes practise, work hard and are disciplined now in order to achieve a future win. As students, you have given up some things in your life over the last few years in order to achieve, hopefully, a career in the future. You pay the cost now for an opportunity in the future. It is the same with beginning to pay down your debt as soon as you graduate. Believe it or not, that is when the harder work begins.

So, how can you begin to pay down your debt in the most efficient and quickest manner?

Attitude is first. Get serious and commit to paying off the debt. This means, for example, establishing a budget and sticking to it. Know what money is coming in and what is going out. At the same time, cut down expenditure on non-essentials. By non-essentials, I mean anything that does not either help you reduce your debt or pay your monthly (necessary) bills.

Get a job (or even two or three) and budget to pay more per month on the debt, and stick to it. I recognize that it can be difficult to get a job in your chosen field, but the critical thing here is your intention to be disciplined to pay down your debt as quickly as possible. You will achieve your other goals in life sooner and build more assets faster than if you delay the payback.

As I wrote in my last column, government loans can be costly because of the interest rate. A better way to pay off your debt is through a personal loan. These can have significantly lower interest rates. However, in order to get a personal loan, you have to have some equity and credit built up and/or a well-paying job to qualify. If you do not have any of these but you demonstrate trustworthiness, discipline and the willingness to pay down your debt as aggressively as possible, then perhaps someone else would be willing to co-sign a personal loan with you. The difficulty with this is that the credit rating for both you and the guarantor is affected by this arrangement, and if you decide not to or simply can’t pay off your loan, the guarantor is stuck with the bill. Such an arrangement can be fraught with difficulties, but if it is done properly, it benefits both the student and the guarantor because their credit ratings will be affected positively if the payments are made on time and the loan is finally paid off.

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