Category: Students

How much should you Borrow on Your Student Loan?

It can always be a bit tricky to decide how much to borrow when you are taking out a loan. A student loan is no exception to this and you need to make sure that you are not borrowing more than you need. This is because you will need to repay the loan and so you do not want to have to pay back more than necessary. Even though the loans are written off after thirty years you may pay it off before this date if you are a high earner and so you do not want to pay more than you need to.

You will need to start by borrowing money to pay for your tuition fees. This will vary according to where you study and so you may think it is better to go for a cheaper university. However, it is important that you do get a degree from a university that has a good reputation and in a subject that will help you to get a job and so you may need to pay more money. You will also need to borrow money to pay for your living expenses. You will need to pay rent for course materials, travel and food. You will need other things as well over the years.

Some people may just borrow as much as they can. They may feel that there is very little chance that they will ever ay it all back and so it does not matter how much they borrow. This may seem reckless, but as long as the rules on student loans remain as they are, then this may be the case for many students. You do have to be on a very high income or have a big salary growth rate to have to pay off the full loan. It is a gamble though as you may be on a high income and have to pay it all back or the rules may be changed by the government and you may be obliged to pay it all back even if you are on a lower salary or something like that, so it is worth being wary.
Some people may feel that they should pay back the loan. They may feel morally obliged to pay for their studies and feel that they should repay the money that they have borrowed. If this is the case you may want to borrow the smallest amount possible so that you can repay it without having to pay so much in interest payments.

Although a student loan does not affect your credit record because it is taken out of your tax code, it will reduce your disposable income. This means that you will has less money potentially for thirty years. This could mean that you will not be able to afford everything that you need or want and you could end up borrowing money to pay for things. It may also make it hard for you to get a mortgage because your disposable income is a factor when a lender calculates if they want to lend to you and how much. They want to make sure you can afford the repayments and this is important for you as well and if you cannot afford them you would not be happy. It can be hard if you struggle to get a mortgage because it means that you will have to pay rent which is usually a lot more expenisve. You will also not have a chance of buying a home of your own, which is an investment that you can pass onto your children.

So there are some risks associated with a student loan and this means that it is worth considering whether you want to borrow as little as possible. It may mean that you will need to earn money while you are studying to help you to pay for things or that you will need to save up before you go. It is worth having a plan so that you can prepare well and make sure that you spend money accordingly. It can be hard to be really frugal, but most students have very little money to spend so you will be in the same position as a lot of the others.