Over 2.5 million English and Welsh students who started university before August 2012 are currently paying back their Plan 1 student loans. Plan 1 student loans require you to repay when your income is over £480 a week, £2,082 a month or £24,990 a year. The average age to get your student loan paid off is 25 years after the April you were first due to repay, or when you turn 65 years old.
Students unfortunately don’t get the education on what loans mean for them financially in the long term. This makes it a great idea to explore strategies that can help you repay your student loans quickly, so you don’t have debt looming over you for life. Strategies for managing your student debt include exploring loan forgiveness, using the debt avalanche and automatic bill payments. We will explore these and more throughout this guide.
Continue reading for debt advice insight regarding student loan repayments.
Student Loan Repayment Strategies
Debt Forgiveness
Applying for debt forgiveness should only be done in extreme circumstances, but it is a proven way to get out of student debt if you cannot repay it. You could be eligible for debt forgiveness if your university closed before you finished your degree, you became disabled during your studying or you declared bankruptcy.
Debt Avalanche
It may sound a little complex at first, but the debt avalanche strategy is fairly simple. If you owe £300 per month for student loans, you should budget £350 instead as you can pay the extra £50 to cover any interest rates. Once the debt with the highest interest rate is entirely paid off, then the extra repayment funds can be used to pay off the next highest interest-bearing loan. This can be very beneficial if you receive a maintenance loan at university.
Debt Snowball
Debt snowball works by paying off the student loan debt in order of the smallest to largest balance, which helps you gain momentum as you complete each payment. Paying off the smallest debt first can make you feel more positive, as you’ve made a good stride in eliminating your debt. This is great if you can’t afford a huge payment.
Automatic Bill Payment
Setting up automatic payments will eliminate the stress of repaying loans, as you won’t even think about it coming out of your account each month. You can set up automatic payments through any bank or credit card service that you own. Some private lenders even offer a discount on the interest rate if you agree to automatically withdraw from the account each month.
Create a Schedule
It might seem like a huge hurdle to create a payment schedule of your own to pay off your student loans, but there are ways to do it effectively. You can use a budgeting tool to work out your budget to help you with creating a financial statement. This can then be used to see what you can afford to pay off each month. You can set reminders to ensure that you don’t miss any payments.
