Obama took 10 years
to pay his student loan
President of the USA, Barack Obama, took more than 10 years to pay off his student loans. You could be the leader of the free world one day, but choosing to pay off your student loan over the longest terms offered could prevent you from getting financing for that a new car or house.
Most students need financing for tertiary studies, and student loans are the route many of us have taken. In the US, outstanding student loans total US$1-trillion. South Africa's National Student Financial Aid Scheme has already provided R23-billion in study loans since 1992. The average graduating student's study loan debt averages R50 000.00.
If you have a student loan, pay it off as soon as possible. While you were studying, you probably had to pay a small monthly amount to service the interest amount on the loan. Now that you've graduated, the real repayments start. The amount you'll have to pay now will increase dramatically because you now have to pay off the capital amount and the interest charged on this amount.
Most graduates make use of the longest possible terms available to reduce their monthly repayments, averaging between 6-10 years to pay off their student loans. Increasing your repayment term may seem cheaper in the short term, but it will cost you more over the long term.
Graduate A
Graduate B
Perhaps the greatest cost of dragging out paying off a student loan is that when you are ready to buy a car, or a house, and you need financing, the debt still owing on your student loans will affect you application. Do you want your student loan preventing you from getting the financing you need?
Working out your budget1 will allow you to determine just how much you can afford to pay each month towards your student loan. Always pay additional amounts when you can, as well as the highest possible monthly repayment you can afford to shorten the term.
Leave college and university where it should be - in the past. You worked hard for your qualification: don't let it prevent you from enjoying the lifestyle you deserve.