When you’re struggling with student loan debt, it can be tempting to take out an extended loan to buy a house, buy a car or get a footy team.
But when it comes to student loans, it’s best to start saving for a long-term solution, according to a new study.
Read more The average monthly debt for Australian students with student loans is $26,000, and it is expected to grow to $46,000 by 2020, according the Student Loan Review Council (SLRC).
In order to avoid a debt bubble and the looming repayment crisis, many people with student debt are focusing on their short-term savings.
But not everyone can afford to save to buy property, buy cars or even go to the gym for a month or two to cover the costs of a year of living in the city.
In the report, the University of New South Wales’s Student Loan Research Unit analysed data from the Australian Student Loans Survey, and found that the average Australian student borrows $26.80 per month, which is the average monthly payment for a 20-year-old who started paying off their student loans in 2011.
It’s worth noting that the loan payment rate is higher for students who are enrolled in the higher education sector.
The median loan payment for students enrolled in higher education is $35,000 per annum.
When it comes down to saving for your student loan payments, there are a number of ways to cut costs, the SLRC says.
For students, the easiest way to cut back on student loan costs is to pay down your debts over the course of a couple of years.
“The key is to start putting money aside now,” it said.
One way to save for a shorter period of time is to take advantage of an extended credit line.
This allows students to defer payment over a period of several years.
“In some circumstances, it may be better to use an extended line of credit to help offset the cost of your loans.
However, it should not be considered as a substitute for a traditional student loan repayment,” the SLCC said.
In some cases, the most effective way to reduce the cost to pay off your student loans over the short- or medium-term is to reduce your monthly payment.
This means cutting back on your spending over the next few years, rather than a specific month.
“You can look at whether you’re able to pay your mortgage off or your rent off over a longer period of the year, and cut back more or less,” the report said.
“There are many ways to save money in the short term, but you should be careful to pay it off in a way that will allow you to pay the full amount in a few years.”
In the long-run, it is better to have your money invested in property or in other investments, rather then borrowing from a lender.
“We have heard that some people will not be able to make payments on their student loan over a long period of years, but the alternative is to put more money into property, which could be cheaper than borrowing from an external lender,” the SlRC said.
The report also recommends students pay a smaller amount of interest on their loans, and that they use a minimum loan payment of $2,000 a year, rather the current standard of $4,000.
Student debt can also impact the way your family and friends see you.
The SLRC recommends that students and their families “keep a good balance” of savings in their savings account.
The amount that you should save for your debts can be influenced by the size of your savings account, and by whether you have a mortgage or a credit card.