10 ways to stop student debt becoming a disaster
The averagegraduate will owe more than £17,500 (Push.co.uk, August 2008) - an increase of9.6% compared to 2007 - so it's even more important to manage your moneyproperly if you want to avoid a huge debt for the next decade.
1. Do your research
Start with theStudent Loans Company, where you'll be charged a lower rate of interest thanany bank or other loan provider.
Then use pricecomparison and financial advice sites to find the best bank accounts, loans orcredit card.
Before youapply for anything make sure you know the true cost of borrowing - thisincludes the fees and penalties that may apply.
2. Your student loan isn't free money
Though youwon't have to repay your student loan until you graduate and earn enough tomeet the repayment threshold (currently £15,000), interest will still begathering from the time you leave university.
If you don'tmake an effort to make repayments, you could still be in debt in your 30s.
But bear inmind that you need to prioritise - there's no point paying off your studentloan first if you have other debts accruing more interest.
An onlinecalculator, such as the FSA's at www.moneymadeclear.fsa.gov.uk, will help youcompare the costs.
3. Your financial future starts here
How you managestudent borrowing will shape your financial future, because your repaymenthistory and details of the bank loans or student credit cards you have takenon will be registered on your creditreport (although anything with the Student Loans Company are not included).
Your creditreport is checked by lenders when they decide whether to make you an offer andwhat interest rate you'll be charged.
If it shows that you aren't overstretched andregularly make repayments on time and in full, you'll qualify for better deals.
You can seeyour Experian credit report for free.
4. Pay what you owe
If you missrepayments, ignore bills or end up in court because of debts it will berecorded on your credit report.
This will affectyour ability to borrow for years to come.
Bad debts caneven influence your ability to get a job or rent a home, because landlords andemployers may also check your report for court judgments, an IVA or abankruptcy order against you.
5. Don't avoid borrowing altogether
Even if you canmanage on your student loan and the income from part-time work, you need tobuild a credit track record.
For example,you could take out a credit card and use it for everyday expenses, then pay itoff in full each month.
That way,lenders can see that you are reliable - so they'll be more likely to make you agood offer in future.
If you don'tborrow anything, they have no way of knowing whether you'll honour yourobligations - no credit is the same as bad credit in the eyes of many lenders.
Just make sureyou don't borrow more than you can afford to repay, or you'll end up with more debt. 12»
