How to Overcome Student Debt

Student debts can seem so enormous that the task of dealing with them appears insurmountable, especially when combined with the uncertainty of moving into the world of work. The good news is that fairly minor changes in your lifestyle, finances and attitude can go a long way to solving the problem. With planning and commitment, most debt problems can be resolved, though long-term thinking and frugality may be crucial in relieving the burden.

Instructions

1

Prepare yourself before graduating. If it's too late for this already, don't worry about it. There is usually a six-month grace period between graduating and having to start repaying a student loan, but thinking about your future before graduating is worthwhile. Consider getting some kind of professional job experience before graduating via an internship or similar scheme. Remember that though you will be graduating, hundreds of thousands of other people will be doing the same thing at the same time. An academic qualification is not necessarily a passport to a decent job, but experience may help you get a decent salary upon leaving college, even if you are not yet working in exactly the field you would like.

2

Organize the best repayment plan for you. If your income is not secure, there are repayment plans that are tied to your income, protecting you from problems if you suffer a sudden loss in income. If you are reasonably secure of your salary, however, a fixed-amount repayment plan will usually have a lower rate of interest.

3

Write a budget; work out your debts, expenses and income exactly. List your debts in order of priority; things like utility bills, rent and taxes need to be paid first (obviously, you need to factor in a budget for food and essentials), as failure to pay them can result in serious consequences. Then list the highest-interest debts first. (These are usually credit cards.) Work out what you can afford to pay off each month and how long it will take you to clear your debts, but don't be unrealistic about the budget you set yourself. If you set targets you can't achieve, you will become demoralized and find it harder to manage your situation.

4

Make all payments on time because failure to do this can destroy your credit rating. If you can't make a payment on time, contact your lender rather than ignoring it and try to arrange something. The lender can often be more flexible than you would imagine.

5

Change your attitude to your debts. Once you have worked out what you need to pay every month, try not to think of your debt as this huge sum hanging over you. Concentrate instead on making these monthly payments, thinking of them as just another bill. It can still be hard to make them from time to time, but this way you can help yourself to avoid unnecessary stress and anxiety. But don't let this tempt you into forgetting how important your repayment program is.

6

Find ways to be frugal, paying attention to small habits that you won't miss. Bringing coffee with you in a Thermos rather than buying your coffee on the way to work could save you around $800 a year. Work these costs out and put the saved money directly into servicing your debts. This way you are paying off your debts with practically no impact on your daily life.

7

Buy a house or condo, rather than renting, as soon as you can sensibly do it. This might seem unrealistic but if you buy and share it with people you trust and rely on, monthly payments can be equal to or lower than renting, and that money is accumulated in an asset that will probably accumulate in value, rather than disappearing from your accounts.