If there is one economic issue that remains perennially controversial in modern society, it is the cost of tuition and steadily the rising level of student debt. According to recent statistics, student loan debt rose by a staggering £12.6 billion last year, which represented an increase of 17% year-on-year. This left the cumulative amount of student debt at a peak of £86.2 billion in the UK, and this is set to rise even further over the course of the next few years.
Overall, it is estimated that two-thirds of students will never be able to pay off their debts, as they struggle with spiralling tuition costs and a lack of viable opportunities in the real-time labour market. Stagnating earnings are also a huge concern, as wages fail to keep pace with the cost of living and make it extremely difficult for graduates to repay their debt. This type of financial trap is extremely debilitating, and one that may ultimately prevent you from achieving your full potential.
With this in mind, it is imperative that students adopt a proactive mind-set and take practical steps towards avoiding the pitfalls of the student loan trap. Here are three pieces of actionable advice that can help them on their way.
Budget your finances and Cut costs where possible
While this may sound obvious, it is all too easy to tailor your lifestyle according to the precise amount of money that you receive through your loan. This represents a false economy, however, as it is far more sensible to minimise expenditure where possible and optimise the amount of money that can be saved on a regular basis.
By minimising the amount that you spend on groceries and budgeting a conservative amount that is to be used for entertainment and recreation, you can retain a percentage of your loan amount and commit this to a high yield savings account. Not only can you earn interest on this capital, but you can also ease the future process of repaying your debt.
If you choose to borrow, do so responsibly
While some may discourage you from borrowing money as a student, there is nothing fundamentally wrong with this practice so long as you adopt a responsible and informed mind-set. In this instance, short-term lending can help you to cope with unexpected costs or cash-flow shortfalls, while also helping you to avoid secured lending and more unsuitable financial agreements.
The key is to partner with a responsible and transparent lender, and one that has a reputation for fairness. Take Smart Pig, for example, which was the first, unsecured lender of its type of be certified by the FCA in Britain and just so happens to specialise in student credit. It is also important that you understand the nature of short-term lending and read the small-print carefully, as this will help you to factor in precise interest rates and calculate the total amount repayable.
Increase and Diversify your earning potential
Students can also bask in the fact that it has never been easier to earn money through diverse sources, even if earnings’ growth has fallen during the last decade. This is a trend that has become increasingly prominent in the Western world, with freelancing an increasingly popular discipline that is practiced by nearly 1.5 million people in the UK. Such a trend offers huge opportunities to students, particularly those with a marketable skill and an ability to organise their time effectively.
Whether you create an academic service to boost your income or freelance as a copywriter or designer, it is crucial that you consider your precise skill-set and the amount of time that you have to commit to the venture. Once successful, you can scale your efforts to optimise your earning potential and accumulate wealth, which in turn will enable you to ease the student loan burden once you have graduated.