Graduates could save £hundreds when repaying student debt

22 July 2008 / by Daniela Gieseler
When leaving university, sorting out their finances might be the last thing many graduates want to worry about, but shopping around for the best deals could save them hundreds of pounds, financial information provider Moneynet.co.uk shows.

After finding a job, the next crucial step is to work out how much disposable income is available and how best to spend it, Moneynet.co.uk CEO Richard Brown recommends.

"Once you start work, it’s important to take some time to work out a monthly budget. By actually putting pen to paper and understanding what’s coming in and what’s going out, you’ll know how much you can use to start to repay some of your student debt." he said.

The next step is working out a debt repayment plan, Mr Brown says: "Add up precisely how much money you owe and set about reducing your debt. It’s pretty common to finish your studies with a five figure debt to service, but don’t break your neck trying to repay it in an unrealistically short timeframe."

When starting to make repayments on your student loan or other outstanding debts, it is important to pay off the debt with the highest interest first. While student loans might be the largest part of student debt, they benefit from low interest rates compared to other loan products, and graduates should therefore not rush to pay them off.

Credit card debt ought to be cancelled first, and graduates could save extra money by applying for a 0 per cent balance transfer credit card such as the Virgin Money MasterCard in order to save on interest payments.

Many graduates remain loyal to their student account provider, but although the choice of graduate finance providers is currently limited to six major players in the market, switching current accounts could help graduates to make considerable savings.

With interest rates on authorised overdrafts ranging from 9.9 to 18.9 per cent, choosing the right provider makes a considerable difference. Banks such as the Royal Bank of Scotland, Lloyds TSB and Barclays also offer graduate packages with large interest-free overdrafts for the first few years after graduation.

And it also pays to think ahead, as Mr Brown adds: "You can't really start any serious saving until you get your debts paid off, but probably not a bad idea to set up a regular savings account to salt away money for annual expenses such as car tax and MOT and Christmas - this will help you budget.

"It's never too early to start saving for your retirement - check out what your employer is offering," he continues.

"If you are very fortunate you will be part of a final salary scheme, but more likely it will be a voluntary contribution scheme where your employer will match your contribution. It is tax efficient and will also save you having to contribute a fortune each month when trying to play catch up when you are older."

© Fair Investment Company Ltd