Paying of student debt

tazg101

I have just graduated from University and like many other students I have a bit of debt made up from my 5 year course, roughly about £6000. £4,500 from the student loan company and £1,500 from a student bank overdraft. I have just started a steady job with a pretty low pay but will increase over time with the company. What will be the best way to pay this debt of, would I be best of getting a credit card with no interest for a year and pay the student deby off and pay the credit card off slowly(after no interest period is over transfer my amount to another card).?

Any advice would be great

Debt_Free_Chick

If you could get a card with 0% and provided you could fully pay off the loan during the 0% period, then this would be the best bet. However, 0% periods are generally 6 or 9 months (very occasionally 12 months and rarely longer). So would need to be able to pay £1,000 each month if the card had a 6 month 0% period or £667 each month if the 0% period is for 9 months. You say your pay is low ... could you afford these payments?

However, if you do not pay it all off within the 0% period, then you start paying interest at the standard rate - anything around 15% or higher. Here, you would be better off keeping the student loan.

You may not be able to get a credit card, with a new job and (as you say) relatively low pay. If you did get a card, you would then need to get another with a new 0% period to avoid paying the higher interest.

The interest rate on student loans is certainly less than the standard interest rate on a credit card, and possibly lower than most personal loans.

Unless you are confident you could pay off the whole loan within 6 or 9 months, you're probably better off as you are.

HTH

Unbelievable_2

As usual it's excellent advice from Debt_Free_Chick. Credit is due to you too 'cos £6000 debt after a 5 year course seems like pretty good money management to me - well done.

In light of that you could try applying for a 0% card - if you are successful you could calculate how much you can safely repay in the 0% intro offer and then reduce your overdraft by that amount. You'll be paying less interest and you'll be building up a decent credit reference record too! ::)

Rafter

Student loans have a very low interest rate at around the rate of inflation I think. So your loan isn't actually growing in real terms at the moment.

Your overdraft probably will be costing you though, so you should try to repay this first and a 0% card is probably the way to go. You will need one that gives you the option to pay off an overdraft though, Egg or an MBNA card for example.

I'd hold off paying your student loan for now, you can earn more in a savings account than the debt is costing you and you may want to buy a car or start saving for a house.

Good luck

R

mzmoneypenny

As per the previous posts, I would advise you to leave the student loan company debt as it is - it will come into repayment next April providing you've reached the threshold to start paying it off.

How about a graduate bank account to help pay off the other debt? Have a look here:

http://www.support4learning.org.uk/money/banks_grad.htm#overdrafts

The accounts on offer have interest free overdrafts of up to £2000, and you can take up to 3 years to repay.

Have you approached your own bank about transferring your student bank account to a graduate one? They may offer favourable terms along the lines of the ones given in the above link.

Hope that helps!