For practically every student in the UK it will be necessary to take out loans in order to pay for tuition and living expenses. Now it’s no where near as bad as our neighbours across the pond. My girlfriend is American and she and her peers have loans in a whole different league with university costing in excess of $40’000 a year where as mine was $5000 a year. With the latest changes to the student loans prices and almost every UK university taking up the opportunity to raise the tuition costs to £9000+ a year students should be more focussed on keeping on top of their debts.
The reason which sparked this post was when I got home from work I opened up my post to find that the student loans company has sent me my annual statement. Now I was a typical university student and knew i had interest but always assumed that the interest started when you finished university. I was quite wrong! From the first time my tuition fee was paid to my university I have been accumulating interest on my loan which at around £21 a month over the last 3.5 years has mounted up to almost £1000. I was pretty shocked and disappointed in myself. I am usually far more vigilant and savvy than this and I really let myself down!!!
Pay off interest at source
This holds true no matter what kind of loan you take out. I’ve spoken before in other posts about the brilliance of compound interest. Well interest’s accumulation can see debt mount up faster than you can possible imagine. The interest rate on my loans is pretty low but still I wish I had paid off the interest sooner.
The interest rate in the united states is around 6% which is why there is huge pressure to get a high paying job quickly in order to pay off this mounting interest.
It’s worth noting that it’s not always advisable to pay off your student loans outright and especially not while interest rates are so low. If you want to go an get a loan to start a business or a mortgage it’s more expensive to do so because the rates of interest are much higher. This being said if you go down this route then make sure that you have an impeccable credit score. If you’ve had any history of missing loan repayments then it’s advisable to pay off any outstanding debts as quickly as possible.