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7 Tips for Managing Your Student Loan Debt During Inflation

Student debt in the UK has long been an issue for students and policy-makers. The total national student debt keeps piling up. Today, the figure is a whopping £141 billion.

Managing this debt is essential to avoid any default or delinquency of loans. Without careful planning of daily expenses, one may face a cash crunch. Therefore, one must know all the money-saving tips and debt management techniques to pay back student debt. With rising inflation, expenses are ever more difficult for students to manage.

You could go about increasing your income, cutting your expenses, or smartly managing both. In addition, the federal government allows for different refinancing and forgiveness plans. We go over all these in this article.

After thorough research, we have come up with 7 ways to manage your student debt during inflation. Though not exhaustive, the list covers various ways available to a student.

Understand the Loan Terms

This is probably the most basic, yet essential step toward efficient management of your student loan

You should know the terms of your loan, the interest charged, the principal, the loan term, and details regarding default. Some people have more than one loans which make managing them harder. In this case, you should know all the opportunities for handling more than one loan. Your loan provider is the go-to contact for this purpose.

Student loans in the UK are broadly divided into those taken either till 2012 (susally called Plan 1) or after (Plan 2). This is due to the student loan changes done in 2012. There are separate loans for tuition fees, and housing expenses (maintenance loans). The total sum would be the student debt.

Repayments only start after the first April of your graduation. However, there is a minimum level of income that a graduate must have in order to start repaying. The limit is annually £27,295. Any amount earned above this is charged at 9%. Anyone earning below this amount does not start repayments.

So for instance, if your income is £30,000, you pay £243 which is 9% of 2,705 (30,000 – 27,296).

Consolidation and Refinancing 

It is easy to lose track of things if you have multiple loans. This is where consolidation comes in. 

Consolidation clubs all loans together, and a new single loan is issued instead. With this, borrowers only have to make single monthly payments under new terms. For this, you will have to contact your lending agency and negotiate a consolidation loan.

Refinancing is the replacement of the current loan with a new loan and new terms. It can be similar to consolidation as well in the case of multiple loans. However, it is only beneficial if the negotiated terms are better and the interest rate charged is lower. The better your credit score, the more likely it is to secure better refinancing.

Keep in mind that opportunities for consolidation and refinancing vary significantly in federal and private loans. There may be less borrower protection and margin for negotiation in private loans. 

Find An Income Stream 

One of the best ways to manage student debt is to start earning and have some sort of income stream.

For students, there are several opportunities to earn some cash. These can be part-time jobs offered at different stores and restaurants, freelance jobs on the internet, offering tuition to other students, and on-campus jobs such as teaching assistants. 

This helps lessen the burden of daily expenses and you may even be able to afford some trips or luxury items that you would not buy otherwise.

You can also contact the career services office at your university to connect you to different recruiters during your college life. Most offices are very helpful in finding the right position for you.

Keep Track of Cash Flows

An essential skill one should have in life is cash management. There are so many expenses that it can be challenging to keep track of how much exact cash you have, where did it go and how much did it come in.

Several mobile and computer apps exist that ease recording transactions and maintaining different accounts. Categorized transactions give insights as to which sort of stuff is causing the highest expense such as food or transportation or recreation activities. 

You will be surprised to know how much we spend on little purchases here and there which are not necessary. Setting up a maximum limit or a budget can help maintain a healthy cash flow.

Save Money Using Vouchers 

In today’s world of online shopping, discounts are very common on almost all sites. Whether these are Black Friday sales, Christmas sales, or any other occasion you can buy items at much less prices.

Majority of sites and even offline stores, issue coupon codes and vouchers for several items. You simply use the code on them and enter that into the website. A certain discount is applied to your final transaction. These discounts can even be 50%. 

However, many discount offers and codes go unnoticed as people navigate an endless market of online stores. It would be a hassle to repeatedly check store sites or Facebook pages for any new deals. 

Instead of hunting for these vouchers, there are countless sites on the internet dedicated only to gathering voucher codes from different stores. Check out any one of these, simply copy the codes available there, and start saving while shopping. You will be amazed to see how much you can save on aggregate even after small yet large number of purchases.

Debt Cancellation and Extra Payments

If you are thinking of repaying the loan early or make extra payments, you may want to think again. 

Plan 1 loans are wiped if one reaches the age of 65. Similarly, Plan 2 loans are canceledcancelled after 30 years. Since there is a minimum threshold of annual income to start repayments, you should only pay the amount charged monthly. 

If you have extra cash and savings, then it is advised to invest that somewhere to achieve returns, rather than making extra loan repayments.

Defer Payments

DeferringDefering is the postponementpostponing of loan repayments for a period of 12 months. 

If your annual income is 36,284 or less, you may qualify for deferment. Only the gross income of the debtor is checked. Usually, an eligible application is easily accepted.

However, keep in mind that interest continues to accrue during this period.

The Bottom Line

Student debt does not have to be a cause for concern if you just know some money-saving trips and options for relief in student debt. This article is a brief overview of all you can do to properly manage your student debt.

Contact your loan provider for a better understanding. They are the first point of contact for any information regarding loan terms and details.

Spend your summers productively, look for ways to earn some extra cash, maintain an accurate account of your cash flows, save money while shopping and avail all debt relief you think you are eligible for. 

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