Rising inflation has affected all aspects of our daily lives, from higher mortgage rates to a rise in the cost of living. Unfortunately it has also lead to rise in areas like education, which many believe should be free. The cost factor has made it very difficult for students to receive top quality education at premier colleges and universities, and the government has not been able to do too much to improve the situation. So, are students getting a raw deal?
Tuition fees are getting higher each year, and students can’t keep up – nor can their parents’ savings accounts. The number of students who are applying for loans is on the rise from the Student Loan Company (SLC). According to latest news, all of this has lead to the entire student loan system being brought to the brink of a collapse.
Many cannot rely on parents for financial help. So, to meet their growing educational expenses, students also have to resort to short term loans like those provided by wonga.com (despite the student demographic being something the Wonga brand strongly avoids targeting). This is to pay for living costs and maintenance fees which some student loans simply don’t cover. Wonga are a UK payday loan company which many young people decide to take advantage of (around 35% of Wonga’s customers are aged 18-24.) By utilising short term loans, some students can pay for books, new computers or sudden car expenses. Of course, it means they must be able to repay the loan too – otherwise their financial situation will get a (whole) lot worse.
Starting off in debt
Scholarships are not meant for all and aren’t freely available, so the only option to fall back on is a student loan for many students. The problem with being in university is not just the cost of tuition but also the cost of living, which will lead to students having an average debt of £44,000 after graduation in 2014, according to The Guardian. All of this could affect their credit ratings – besides being a stressful burden. Many prospective students choose against university simply because of the financial implications of doing so. Although you can repay the loan over the course of your working life, many still feel they need to clear the debt more quickly to avoid interest rates rising even further. If you are burdened with a student loan that you are finding difficult to clear, the best option would be to consider going for a student loan consolidation program.
The idea of debt consolidation is to transfer all existing loan balances into a single loan. The benefit of using a student loan consolidation program is the amount can be paid over a longer period of time, which makes the process less stressful and easier to achieve. It also leads to greater savings because the terms and conditions are more relaxed than the original. For example, if a student has a loan debt of £40,000 with the average interest being 8%, it would amount to £3200 – an astronomical sum as monthly repayments. When you consolidate the student loan debt, you could have the repayments slashed by as much as 50%, which makes it easier to pay up. Students can qualify for two different kinds of loan consolidation programs, one being while they are studying, the second is after they graduate and are working.
For those who are studying, choosing a loan consolidation program offers you the chanvce to reduce the pressure of mounting debt and helps to keep a check on it increasing. An added benefit with consolidation is that it can be applied for even if your credit scores are not good, which is a big benefit for a graduate. However, there is of course a need to make small repayments on a monthly basis, which makes it necessary to have a source of income.
Other long-term benefits
The benefits of opting for any kind of debt consolidation program are not only short term, but carry with them certain benefits in the long run as well. As existing loans are paid, a student’s credit scores immediately increase. That would benefit them in the future when they apply for a loan as they would get better terms of interest.
As monthly repayments are lowered considerably, it leaves you with more spare cash that could be used to meet other expenses. An extra £200 or £300 every month would help to pay for other essentials like groceries, utilities etc. As it is easier to clear a consolidated loan, it gives you a better standing with the credit rating agencies, which will increase the confidence of lenders to give you a loan in the future.
Author Bio: The writer has been advising graduates on improving their credit ratings by opting for consolidation programs and takes a keen interest in their financial well-being.