Everyone starts college or university life with good intentions. And even if you don’t have a specific career in mind, you usually at least have an area of interest or an industry that you want to explore.
But, it takes more than smarts and education to get by in this world. You need money to survive and thrive.
College and university life can be a really expensive experience to pay for. There are often hefty tuition fees to pay if you don’t manage to snag a scholarship.
Then there’s accommodation fees, and of course general living expenses, that is money to eat and to get around town. The costs build up quickly. You might even decide that you need a part-time job, so you’ve got enough money to cover everything.
But there are even more expensive things to pay for after university and college.
If you haven’t got one already, you might be looking to get a car, or you might want to get yourself a nice apartment, or even a house, and all the furniture if you’re buying rather than renting. And if you’ve met someone really special, you might want a wedding.
But once you’ve made that break from living at home, you may no longer want to withdraw so much money from the Bank of Mom and Dad (if you were lucky enough to have one). Real independence comes from forging your own path in life.
According to the most recent data from The Institute for College Access & Success, the average loan debt for a bachelor’s degree among the class of 2019 was $28,950.
And at first glance, the average loan debt doesn’t look too bad, it looks manageable. However, that’s just an average, and some students have been known to rack up debts of $100,000.
Moreover, this debt is rising, and is outpacing inflation. The good news however is that it’s not rising as rapidly as it used to.
But until you start paying off the debt, your student loan repayments will only increase, and the debt will not be written off or cancelled.
Of course, what kind of financial deals you can get on loans depend very much on your credit score. Student loans are treated the same as other types of installment loans for your credit score.
There is no statistic that measures the credit scores for college students exclusively, but according to Credit Karma, the average credit score for those aged 18 to 24 is 630. This credit score is ok, but below average.
But sadly, with such fierce competition for jobs in this day and age, even a college degree isn’t a guarantee of getting yourself a sufficiently well paying job when you leave college, and many students often struggle to pay off their student loans, especially in the early days.
And while the average student loan interest rate is just 5.8%, this still works out as a significant amount of money to pay each month, on top of all your other obligations.
And if this is the case for you, then you might find that you have trouble making your student loan repayments, which brings us onto our next section.
If you fail to repay your student loan according to the terms agreed upon in the promissory note, this means that the loan is in default. This is a serious predicament with a cascade of consequences. For more information, please refer to this link.
However, once 7 and a half years have passed since you last made a payment on the loan, and you default, the missed payments can be removed from your credit report. But that does not mean that your student loan is cancelled, and you will still be required to make any remaining payments until the debt is paid.
That said, there are some circumstances in which your federal student loan will go away without you having to pay back every cent, but it’s beyond the scope of this article to go into all of that here.
This 7-year rule does not just apply to student loan debt. Most negative information generally will remain on your credit report for 7 years.
Once the missed payments are removed from your credit report, you will likely see a boost to your credit score.
Make Every Effort To Meet Each Monthly Payment
We can’t state strongly enough how important it is to keep making your minimum monthly payments for your federal student loan. The consequences are dire.
A Loan To Consolidate Your Debts
One way to pay off your student loan in a more affordable manner is to take out another loan to consolidate all of your debts.
That way you can pay off any overdraft that you might have built up, pay off all of your store card and credit card debts, and make a larger payment on your student loan debt.
These loans tend to have a longer repayment period, which makes the monthly repayments much more affordable to pay.
Of course, this method of paying off your student loan may not appeal to everyone. It’s counterintuitive to pay for one loan by taking out another one.
However, so long as you are able to make the minimum payments on any loan you take out, you will be able to maintain or increase your credit score. And this is the key to your financial future.
Wrap Up
The last thing I want is to put you off college or university because of the student loan repayment. College or university is a very worthy goal, and is often a very fruitful investment.
But you should start this adventure knowing that it costs money and that your debt should be repaid. The good news is that federal student loans have a very reasonable interest rate, and making your monthly repayments should be achievable if you make the effort to be careful with your money.
