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How to deal with student debt after you graduate

How to deal with student debt after you graduate

- by Kelly R
After university, you are all pumped-up to dress up, walk pretty in a pinstriped suit, clack your stiletto or Oxford shoes on the sidewalk, into your office’s building, down the hallway and finally, towards your cube. End of scene. Fade to black.

Student debt - some ideas

The real world, however, turns out to be less sequenced, more random and a series of bodies and motions appearing as grayscale on the screen. But that is if you still consider the real world a film, a biopic even. It is time to face it for what it really is. Yes, you got your diploma and now a job, but there are things from your recent past that you still carry in the present—like student loan debt.

In the United Kingdom, you will not start paying your loan until you start earning at least £16,910 for Plan 1 and £21,000 for Plan 2. So if you are hard-pressed in lodging employment even in a local café, chances are you will not have to worry about ever paying it off. But since you also come to the labour pool with either fairly or exceptionally good training from university, you are up on your feet finding work that suits you. You are likely to reach £16,910 or £21,000. Therefore, you will be up for repayment as well. Many students are tempt to apply for payday loans online in order to roll finance their living. this sort of loans are not designed for building long term financial stability

Deductions

First, you have to know how you are going to pay it off. The periodic payment you have to fulfil will be deducted from your salary. It is then left to your employer to make the deduction and pay it to the Students Loans Company. Your National Insurance number is used by the agency to follow your financial status. It is then important for you to declare your student loan debt in the tax return sheet, and likewise your employment status: employed in the country or overseas, or self-employed. Depending on how frequently you are paid, the deduction can be made weekly, every 4 weeks, or monthly.

Computations

How much are you going to pay? Let’s take Plan 2 as an example—and because it is easier to compute. Aside from the annual £21,000 threshold, here are two other breakdowns: £1,750 per month and £404 per week. If you go over £21,000, you will have to pay 9% of the surplus amount that you earn in student loan debt.

To show you how much you are going to repay monthly, here is a simple equation:

Subtract the annual threshold of £21,000 from your monthly salary. Say it is £30,000. So:

£30,000 – £21,000 = £9,000 Get the 9% of the surplus amount. That is 9% of £9,000 in the example: 0.09 x £9,000 = £810 Take the amount and divide it by 12 (months to pay in a year). So: 810 /  12 = 67.5

Get the rounded-off figure. The total amount you need to pay in student loan debt is £67 per month. Now you can do the same computation for any salary level you are on. The good news is that you are not required to pay off anything if your earnings are between £16,910 and £21,000. You might be using either payment level while you are still starting.

Voluntary repayment

In the case that you are not earning up to the abovementioned range, you can still pay your student loan, should you wish. The Students Loans Company accepts one-time £5 or more payments. You can also finish your debt the fastest way: paying in full. You can do the first option while you are still waiting anxiously for a phone call that will spell out the difference between your university days and reality moments: “You’re hired.”

You need to prioritise your student loan just because you need to be moving on as quickly as you can after college. You need to establish a repayment level for yourself so you can get out of the debt faster. You will also probably need to take out other loans, eventually, so use this opportunity to be disciplined. Ignoring your student debt while you are already in the job market will reflect well on your credit history. But learning to deal with it has good effects on your financial health.

Manage your salary and outgoings

In striving to maintain repayments for your student loan, you become conscious of your salary and outgoings. This is a good starting point. List down your expenses from the necessities, to the repayments, to the luxuries. See if there is anything you can slash off the list. And then stick to your budget every month.

How do you make a list? Divide the items between priority and non-priority. Those that fall under priority are rent, utilities such as gas and electricity, and travel fees. Your grocery items also belong here, food especially. Since you are just starting out in the real world, clothing and personal care must also be tossed into the mix.

Entertainment expenses fall under the non-priority category. You do not have to always go out at night and meet up with your buddies from university, right? You also do not have to always buy take-out food. You can prepare your own meals at home and bring them to the workplace. You can also try walk to the office if you live within a reasonably short distance.

The key here is to determine what you must live with and what you cannot live without. That way, you will not be forced to take out unnecessary loans and apply for a credit card just to cover excesses. Here is your chance to start with a clean slate. To start, pay off your student debt loan. It is a good practice in reining in your finances. The faster you finish repayment, the better. That way you will not have to carry several burdens when you start planning for a family or getting your own car and home. Such plans represent a new phase in your life, and with it new challenges, and that is how it should be.

Meantime, enjoy your youth, deal with your current debt, and make the most of your newfound job.

Kelly Richards is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
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