Student loans long term debts and graduate jobs

Having attended university between 1989 and 1991 I was among the last of the lucky students to be in receipt of a student grant – just prior to the change to loans. Since grants were phased out the number of students relying on loans has dramatically risen. Those with live student loans at present numbers well over the 2million mark. The factor that causes the greatest concern is the amount of students looking for graduate jobs who have a sizeable debt quite often to the tune of £20,000 and above.

 Modest repayments and favorably low interest rates do not eliminate the fact that it may well take two decades for many graduates to clear this debt. Of equal concern is a rise of what can only be termed debt ‘anesthesia’ that occurs when the debt reaches this level. Many of my interviewees for graduate jobs who had debts of £20,000 and over borrowed another £3000 almost immediately on graduating so they could travel around the world. Their attitude when questioned generally boiled down to the viewpoint that another £3,000 on top of £20,000 made little difference. Maybe the increase in non-payment of loans is related to this anesthesia. This has resulted in such defaults being registered with credit reference agencies by the student loan company and the upshot of this can have long lasting, adverse effects.

What can you do about it if you graduate with debts? Taking it seriously is probably the first step. Your priority should be devising a strategy to repay it as no matter how much bury your head in the sand the debt won’t go away on its own.

The ideal solution for me is to take out a mortgage on a property at the earliest possible time. This has an extra bonus since not only are you reducing the amount you owe over a period of time but you have yourself an asset that often appreciates in value much faster than its cash value would in a bank. You could consider renting but the investment value would then be nil. Buying a property may seem a large responsibility to assume but if you already have a substantial student debt you in fact already have a responsibility that is unavoidable.

With current house prices being so high for many buying property isn’t an option. A ‘share to buy’ mortgage may be the answer in this instance. These schemes allow friends to take their first step onto the mortgage ladder together. Now legally sound there are contingencies that can be put in place should one or other party decide to opt out of the arrangement.

 Don’t let this depress you! If you are able to get things under control quickly then the good news is that you can reduce the impact of your debt pretty rapidly. I know of graduates who just 18 months after investing in property have realized an appreciation greater than their original debt. Alternatively, get stuck into your work. Those successful in their graduate jobs and being quickly promoted soon rake in excellent salaries that make outstanding debt look miniscule.