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Student Loan Debt Management

Many of today's students have to take loans in order to provide the money for their university studies. Unfortunately, after they graduate they barely manage to meet both ends, due to their bad financial conditions caused by the inefficient management of their student loan. They end up in a worse position after college than they were during their studies. If they have kept the following advices in mind, their chances of falling in these unfavorable financial conditions would have been greatly decreased.

You should always bear in mind that the mismanagement of all your resources will inevitably lead to the mismanagement of your student loan.

Advice #1 Take what you need, when in need!

You should always keep in mind that no matter how helpful and understanding of your need the bank is, sooner or later it will want its money bank. Since most student loans are subject to an interest rate and are given for a predefined period of time, you should be careful about the amount you are borrowing, since by the time you graduate it may accumulate to significant levels. Don't borrow too much because the interest rate that piles up may reach up to 30% of the amount you have initially borrowed.

Advice #2 Clarify whether you can:

  • Reduce your expenses
  • Find a part-time job during your studies with no negative impact on your academic performance.
  • Find a summer job.

This will help you in your calculations regarding the amount of your student loan. Moreover, you should constantly keep a record of your borrowings. You can also use the available online calculators that enable you to compute what you will owe after graduation. However you should keep in mind that the estimations are based on the current interest rates, which are subject to change.

Advice #3 Use the student loan money for the purpose!

Many students fail to use the money from their student loan for the purposes they have taken them for. Instead they embark on spending that supports their lifestyle not their studies. As a result they don't realize that every dollar unnecessary spend now, means another dollar borrowed tomorrow to cover it. Eventually, you will accumulate greater debt and interest to be paid back. Try to concentrate your student loan spending on tuition and books, if you don't want to end up paying back your compulsive purchases and borrowing for your needs.

When the time for meeting the costs of a university comes, both students and parents experience great financial sacrifices. Many parents are even forced to take money out of their retirement plans in order to meet the university expenses of their children. This represents a major mistake on the part of the parent, since it will be wiser to make the student borrow the money since s/he will have more time to return them. On the other hand, by disturbing their retirement plans, parents have less time to put it in balance again.

Living Expenses Control

The best way to get a control of your living expenses is by setting a reasonable budget to follow. Make clear categories in which you can classify your spending according to predefined guidelines.

Try to limit the expenses you make on such things that do not represent a necessity as designer cloths, expensive trips, expensive cars and gadgets. You should learn to practice a certain spending discipline by which you live by your possibilities and at the same time don't deprive yourself of anything.

Borrowing Control

Many students make the mistake of basing their amounts to be borrowed on the assumption of what they will potentially earn after they graduate. As a result the percentage of students graduating in heavy debt has sufficiently increased as compared to the times when students were not readily offered student loans.

In order to avoid such excessive borrowings, make a list of the expenses that you are about to incur the following trimester and base your borrowings on them. Don't be tempted by the larger amount that the bank is ready to offer you, because sooner or later you will have to turn it back.

Final piece of advice: Don't live above your financial possibilities, because four years of financial extravagance may cost you many years of financial privation after graduation.

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