You’ve finally graduated university and are ready to go out into the real world. But with the stress of finding a new job and settling into a work routine, the impending doom of your student loan debt can become overwhelming. But the sooner you’re able to repay your loan, the sooner you’ll be able to earn the money you worked hard in university and now in your career for. But where do you start?
We have created this guide to help you simplify the process;
- Stop and make an effort to understand your loan. We’re lucky in New Zealand that our repayments are taken directly from our pay. Then use a debt calculator like IRD’s one to create a repayment schedule. This will help you figure out how much you need to repay each pay to repay it in full by a certain date. To do so, you’ll need your annual income and your current loan balance.
- Extra payments. Once you’re earning over a certain amount, your payments are deducted from your wage and pay it directly to IRD for you. This makes it simple for you and chances are you won’t even notice it. If you’ve already got a fair idea of how much you pay each pay, include an extra repayment amount in your next budget. Then include this in the calculator to see how much shorter extra payments will make your term.
- Create an emergency fund. This will prevent you from having to use your student loan repayment funds in an emergency. Instead of using budget-allocated income to cover the emergency, you have money you can tap into whether it’s to replace your car to ensure income preservation or an emergency trip overseas. How much you need will depend on your lifestyle, but enough to cover you for 3-6 months should be enough.
- Pay more whenever you can. You should already be paying extra after step 2, but if you get a tax refund, a bonus at work, or work some over time put it straight to your loan. Make sure to treat yourself occasionally, and see it as a reward to keep you motivated in sticking to your plan.
Remember the only time your loan will accrue interest is if you’re going overseas for 6 months or more. There are some exceptions, so make sure you understand the conditions before you jump the ditch for higher pay.
What if I can’t afford to pay more?
The basic concept of coping financially when you can’t afford something is either cut costs or grow your income.
- Re-evaluate your housing situation, could you save money by renting with friends?
- Do you need your car or could you use public transport or downsize to a moped?
- Stop spending so much on entertainment. Instead of a fancy restaurant dinner, what about BYO wine at your local Indian or Chinese?
- Ditch your gym membership and exercise in the park with your friends instead, it’s free, fun and you’ll motivate each other.
- Start your own part time business. You could write blog content, manage another businesses’ social media, babysit or walk your neighbours’ dogs.
- Sell your old textbooks on TradeMe or Facebook.
- Find out about market research surveys where you can earn cash for your opinion.
- Have a garage sale or make a stall for your local markets.
- Sacrifice birthday, Christmas and graduation gifts and ask for payments to be made towards your loan. You may even get more having shown you know the value of your education and responsibility in dealing to your debt.
Disclaimer: The above information is general in nature and not intended to be financial advice. You should consider seeking professional advice before following any suggestions in this blog/website.