This might be an obvious answer to some, but many are struggling with taking out a student loan because of the debt that comes with it. As a student or prospective student, it is important for you to know the following. There is nothing wrong with taking out a loan to chase your dreams. But, when you are achieving your dreams, you should not conveniently forget that you took out a loan, and enjoy the luxury of other expenses. To better understand how you can manage the two, let’s first take a look at what a student loan is.
What is a student loan?
A student loan is a loan specifically formulated to help cover the costs of university tuition fees, accommodation and study material. It is important to specify you are applying for a student loan and not simply a personal loan. This is because student loans are constructed to have lower fees and interest rates, as well as deferring the loan repayments until the student starts a working career.
Keep in mind that a student loan will need to be applied for at each new study year. This is what makes it different from scholarships and some bursaries – apart from the fact that you have to repay it. You will either apply for this loan against your own name, or a principal debtor. Which is what brings us to the next question.
How does it cause debt if it promises good things?
Although debt has ruined many lives, there are debts now accepted by financial gurus as good debts. Good debts are debts like student loans and business loans that will provide a better outcome because of the leverage that the loan provides. Applying for a student loan is a good thing, but still creates debt against your name or against the name of your principal debtor. This means that there is a financial responsibility resting on your name or the person standing in for you to take on the financial responsibility (a parent, trustee, or family member).
This financial responsibility is the debt that you will need to repay once you are in a position to do so. So, the good part is that you have the ability to study and pursue your dreams, but the reality is also the debt you need to repay that made it possible. This is how a student loan can be a form of good debt when it is handled responsibly.
As we mentioned, a student loan can empower you to chase your dreams. This will require you to step up to responsibility and manage your debt and dream with equal measure.
Write down what you see
To keep yourself accountable, make sure you have written down your vision. This vision will be what you want to achieve, e.g. your degree, and what you are going to do with it. Write down the reasons that you are pursuing this dream.
First things first
Before you hit the clubs or engage in all the social and leisure activities, your first responsibility is towards the dream and the debt. This means getting your studying done before the parties (yes, even the church parties) and paying any interest on your study loan before spending the money on leisure activities. You don’t want to add an extra year (of cost) to your studies because you forgot what comes first.
If you can see yourself slipping in some areas of study or in payments for your study loan, pick up the phone. Speak to someone that can help you through the work and get the foundations sorted. Payments can usually be rescheduled without a big train smash but require a heads up to the bank or financial service provider.
Honour your commitments
Once you walk out of that graduation hall with your degree in your hand, remember what made it possible. Prioritize your first couple of paychecks for however long it takes to honour the commitment you made to pay back the study loan.