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If you are one of the thousands of students who receive a grant, work part-time and still find you have a gap in your finances, then you have probably started looking at student loans as a way of financing your education. When the government assistance runs out and parents are unable to meet your financial needs, students often have no option but to turn to a high street loan provider. More...
Students are under increasing financial pressure. Student loan interest rates were controversially doubled in September 2007 from 2.4% to 4.8% making it the highest rate since 1991. It means that a graduate who went to university in London and borrowed the maximum of £17,970 could be paying back an extra £400 a year.
So with student finances becoming more critical, what solutions are there to the student with money problems?
Students can obtain financial assistance though Local Education Authorities to help with tuition fees and other related costs. Make sure you know what financial help the government has made available to students. Visit www.aimhigher.ac.uk, www.heinfo.slc.co.uk, and www.direct.gov.uk for details of financial entitlements and information relating to student loans.
However, it doesn’t take a degree to know such financial aid for students only goes so far, so know about student loans and choosing the right loan is crucial.
The Student Loans Company will permit you to defer your student loan if your starting salary falls below a certain level. This means you can repay your student loans when you are more able to afford it – a luxury you won’t find with any high street lender. Bear in mind, however, that deferring student loans will incur interest, and could take you many years to clear.
Students should either take advantage of any government benefits or grants before they apply for student loans on the high street. It is on the high street where borrowing to support studies becomes difficult. This boils down to two reasons:
A student’s job prospects on graduation can persuade a moneylender to offer an unsecured loan. However, these are often at elevated interest rates compared to those offered to individuals in full-time employment.
The monthly repayments of a student loan from a high street lender will depend on; the amount borrowed, the term, interest rate and whether it is an undergraduate student loan or postgraduate student loan. Be aware that any student loan from a financial company will require the first repayment to be made from the date the money enters your account. Therefore the arrangement with high street lenders is somewhat different from a loan from The Student Loans Company, for example.
Pay day loans provide cash advances of several hundred pounds and are designed to tide you over until you are paid or receive funds from a student loan installment. However, this small but convenient loan comes at a price and as expected the sting lies with high rates of interest. Pay day loans should only be used as a very short-term solution.
Failure to maintain payments to any type of student loan can damage your credit rating. This may not seem like an issue in the first year of college but will cause problems when trying to get credit for a car or house post-graduation.
Only apply for additional loans when they are to be used for an item that is integral to your studies and only at a rate you can afford.
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