Apologies for the delay but have been studying, I have been asked to comment about student debt and will do in this blog but first I have to ask the question
What to do if you find yourself struggling with debt
The first thing you need to work out is whether you have a debt problem or a money management problem.
You may ask what’s the difference?
Debt problem is defined as a situation where you are unable to meet your monthly credit commitments as they fall due and at the same time maintain a reasonable standard of living (i.e. you cannot pay your creditors the contracted monthly amounts and have enough left over to cover essential living costs).
Money management problem is where your income is sufficient to cover both your debt repayments and your essential living costs but you spend too much on items that are essential for example you buy the brand new £100 trainers when you only have £250 left of your salary to last you for a month and are always repaying loans to friends and family.
Once you establish which group you fall into you can then take action to improve your financial situation.
As promised Student debt
The generation born between 1980 and the mid-1990s, have turned to alternative finance including payday lenders and pawnshops in the past five years!!!!!. Parents beware they will not tell you that they are doing this.
When you’re studying, you’re often on a very low income and have to rely on bursaries and student loans to cover your living costs. Sometimes it’s possible to find part-time work that works around your studies, but even with this you may still find that your money only stretches so far.
Fortunately, once you’ve graduated, you will not have to repay the loan until you’re earning above a certain salary threshold. Many students/young people are offered tempting credit products such as student overdrafts and credit cards. They may seem like a safety net at the time, but they can quickly spiral out of control if you rely on them too much.
How much do you have to repay:
You will repay 9% of anything you earn over the income threshold.
The UK income threshold is:
• £17,775 before tax per year
• £1,481 before tax per month
• £341 before tax per week
For example, if you earn £1,650 per month, you would pay 9% of £169, or £15 per month to your student loan
N.B The collection of student loan repayments is a shared responsibility between Student Loans Company and HM Revenue and Customs (HMRC).
To avoid debt.
Getting in the habit of budgeting and living within your means is key to staying out of debt. If you find that you’re already in debt, help and support is available but it’s really important that you don’t make your situation any worse. This means:
- DON’T use or continue to use a credit card or a store card
- DON’T increase your overdraft
- DON’T TAKE OUT PAY DAY LOANS!!!!!!!!!
- Open a savings account with your local CREDIT UNION.
Below is a table which shows the actual cost of various payday loans so for example a payday loan with payday UK in four months the £100 loan after 2 months becomes a £150 debt
Things you can do to prevent yourself getting into debt
Being on a limited income means you have to think about how you manage your living costs as well as your debts.
You can do this by:
Taking a close look at your budget to understand how much you have left over each month once you’ve covered your living expenses
Shop around for the best deals
Taking advantage of student discounts.
If you are not living at home:
Doing regular price comparisons on things such as utilities, mobile phone provider
Learning how to cook staple meals for the week, as this can often reduce the cost of food
Are you still in debt to the SLC Student loans Company.
Can the debt be cancelled or written off?
The criteria where your student loan is automatically cancelled depends on when and where you took out your first student loan.
England or Wales – From 1st September 2012
Your student loan is cancelled 30 years after you become eligible to repay.
Before 1st September 2012
It will be cancelled if you:
• took out your first student loan in or before academic year 2005/06, then it will be cancelled when you turn 65; or
• took out your first student loan in or after academic year 2006/07, then it will be cancelled 25 years after you became eligible to repay
If the Borrower is disabled
If a borrower can prove they’re permanently unfit for work due to a disability, then their loan could be written off.
Student loan not your only debt
There is a golden rule for anyone with multiple debts:
Always focus on paying off the highest interest rate debts first.
The reason for this is simple. The higher the interest the quicker the debt grows, so you want to get rid of it as soon as possible
Please continue follow the tips and guides in relation to budgeting in the previous blogs
Tip for the day