Post Graduation Advice

Lesgaz

Having helped my son through university for the past three years, he still has a number of outstanding debts, e.g. student loans, overdrafts and credit card.
I need to be able to offer him some advice about the best way to settle them.
Is there a recommended strategy, economical way of doing this?

regards

Les

Angus78

I want to know also if there is a recommended strategy for paying off student loans in comparison to other debts.

I believe that this issue should be highlighted as there are many people in the same boat.

Garf

Once the graduate is paying over 15k a year they will have to start paying off their student loan the following April after graduation. It doesnt make alot of difference on top of whatever the graduate is getting taxed with anyway.

Ive a credit card that needs paying off but its with the Student (now Graduate) account that I have now and offers a far better APR than most other credit cards. You could look into doing the 0% balance transfer options.

Most students will have an overdraft with their current account. Which is still free 3/4 years after graduating. But the overdraft limit will shorten each year ie. 1st year = 1500, 2nd year = 1000 and 3rd year = 500.

The 2 main strategys Ive used is moving home for a year with the parents, and getting a job asap !!!

BWZN93

Usually, Student Overdrafts are interest free for the duration of the degree, and sometimes for a year or so into graduation, then the overdraft will revert to whatever the standard apr rate is. Ditto for credit cards.

Student Loans are low cost loans, and can be left till last to pay off - the employer will automatically start to take repayments from April after graduation (i.e - graduate today and start paying back April 06).

Firstly, find out what terms apply to both the overdraft and credit cards, and what the apr's will be when interest free ends. For instance, my own overdraft ends interest free in july 2006, as I get an interest free year as a graduate too. I will save the overdraft repayments in a high interest account, and will trasfer the £ just before the interest free ends, and will then get rid of it - paying no interest and even making myself a few pounds in interest. I would do the same for the credit card.

The student loan imo, is not worth trying to pay off early, in my case, I have £17k, and it is going to take me a while to pay off anyway, so I would rather pay off o/d and cc's. then save to buy a house, and let the SLC deal with student loans...

Incidentally - you only start paying back student loans when you earn over £15000, anon a £16000 wage, and loans of £17000, will be around £45 month for around 31years, and the amount rises and falls in line with your income. There is a good calculator here:

http://money.msn.co.uk/Student/BankingandFunding/LoansHome/Tools/Studentloanrepaymentestimator/default.asp?#

SLC repayment advice is here: http://www.slc.co.uk/noframe/lr/sss/repayov.html

As you can tell in my case, its a long time, and I can choose to overpay if I like, although to be honest, id rather put my money in brick and mortar, and let that loan go on for as long as it wants really.

HTH

Jo xx

David_Brent

I would firstly balance all his credit card debts, try and get him to open up a graduate account or look at some 0% balance transfer deals available, I have just graduated so im looking at the royal bank of scotland they seem to be the best graduate account to go with at the moment (thanks to the info on this site) in terms of interest free overdrafts. He could open up a graduate account and pay off his credit cards with his interest free overdraft which lasts for 3 years which should give enough time to pay back once employed. Don't worry too much about his student loan interest rates are very low and only a little is taken when working full time, it seems rather overwelming when you see how much you borrowed, but the main thing is that he balances his credit cards because they love taking money from you with ridiculous % rates.

BWZN93

David_Brent wrote:

I would firstly balance all his credit card debts, try and get him to open up a graduate account or look at some 0% balance transfer deals available, I have just graduated so im looking at the royal bank of scotland they seem to be the best graduate account to go with at the moment (thanks to the info on this site) in terms of interest free overdrafts. He could open up a graduate account and pay off his credit cards with his interest free overdraft which lasts for 3 years which should give enough time to pay back once employed. Don't worry too much about his student loan interest rates are very low and only a little is taken when working full time, it seems rather overwelming when you see how much you borrowed, but the main thing is that he balances his credit cards because they love taking money from you with ridiculous % rates.

Im with RBS already, and the graduate terms are attractive, and if you have difficulties paying off student overdraft before interest is charged, you can get an interest free graduate loan for 2 years - and even apply just before your overdraft is charged - making the total 3 years of interest free. I like them too!

Jo xx

Lesgaz

Many thanks to you all for the response, I can see a pattern emerging, and you have made me aware of bank accounts that I did not know existed.
regards

binary0110

As others have said, the best strategy to use is to pay off the debts with the highest interest rate first (so, credit card then overdraft then student loan). In terms of the overdraft, try to find a bank which will continue to provide an interest free overdraft for another year (if your son's doesn't already do so) and then begin to make plans to reduce the overdraft over the next year.

Don't pay off the student loan early - in fact, pay it off as slowly as the SLC will allow. The interest rate will always be lower than your son's mortgage (if/when he buys a house) and (for the moment, at least) is also lower than the average savings account interest rate so it isn't worth paying it off early. It would be better to save any money which you would have used to pay off the student loan and then this can be used as a deposit for any future major purchases (like a car or a house).