It used to be that the US took the spotlight when it came to the burden of student loans. But in recent years, other countries have made changes to their university loan systems — or methods of repayment — and now people all over the world face the post-uni debt dilemma.
In the UK, starting in 2012, universities were allowed to charge up to £9, 000 ($11, 987) per year for tuition fees, so some students are now graduating with tens of thousands in debt. In Australia, the government recently passed legislation requiring expats to make payments toward their student debt — the first time that’s been obligatory since 1989. In New Zealand, the government has started arresting people who haven’t paid their student loans. And in the US, students are now graduating with an average of $37, 172 in student loan debt, up 6% from a year prior.
Student loan debt is a big issue
“Student loan debt is a big issue in the UK, ” says Helen Saxon, chief product analyst at UK site MoneySavingExpert.co.uk. “Recent figures showed that English graduates on the new student loan system have the largest average debt in the world at £44, 500 ($59, 269).” There are large differences in other parts of the UK, however — Welsh graduates owe an average of £19, 000 ($25, 306), and Scottish grads face an average of £9, 400 ($12, 520)
How you tackle your student loan debt will depend on where you’re located. For instance, in some countries it makes sense to try to pay debt down early, while in others that’s not the case. Here are some strategies for handling that large educational debt balance you’ve amassed.
What it’s going to take: You’re going to need patience, fortitude and the stomach to wade through forms and fine print. Depending on where you live, there are different repayment options, tax requirements and rules. So you'll need to stay on your proverbial toes and be prepared to take a hard and close look at your best options.
You have to be your own advocate
How long to prepare: You’ve got your university career to get ready for the student loans that will follow it, because in most cases you’re not required to start repayments until you graduate, and in some cases reach a certain income threshold. If you’re still in this phase of your life, take note: Try to borrow as little as possible.
“Working during holidays or in the evenings is a drag, but taking the YOLO (you only live once) approach to debt can make repayment really painful and get in the way of other priorities you have after uni, such as thinking about the property ladder, ” says Holly Mackay, founder and managing director of UK site BoringMoney.com.
Do it now: Research your choices. In the US, there are a variety of ways to adjust your student loans, from income-based repayment to consolidation to refinancing — but you have to be your own advocate.
“Most of my clients aren’t right out of college, I have a lot of 30-somethings who don’t even look at what they have, ” says Mark Struthers, a financial planner in Minnesota in the US. “They just blindly throw money at their loans, and if they’d addressed it, they might have more cash flow or be able to pay it off more quickly with some of the options out there.”
Income-based repayment options make it possible for you to lower your monthly payments if you’re not making much money — helpful if you’re just scraping by. There are also options to have portions of your loans forgiven if you work in teaching or public service jobs. The Federal Student Aid office has good information, as well as IBRInfo.org.
Consider staying local. In New Zealand, student loans are interest free if you stay in the country after graduation. Leave, however, and your debt will incur interest (currently 4.8%). And if you don’t pay or contact the Inland Revenue Department (IRD) to make arrangements, you run the risk of being arrested when you try to return, says Rod Mudgway, a financial advisor with Brackenridge Financial Solutions in Auckland, New Zealand. “This has been happening.”