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Jagpreet
17 April, 2024
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The average student loan size in 2022 was INR 25 lakhs according to an article by CNBC. Recently, you must have heard about the Biden government’s student loan forgiveness plan. There have been questions about whether India can implement this or not. So, why is everyone concerned about reducing student debt?
The cost of education is increasing at a fast pace, not just in India, but across the globe. The cost of that one piece of degree earned a decade back is not even half of what today is. More than 40% of people do not go to higher education or even fail to complete their graduation. Then there are students who are looking for foreign education which asks for a significant investment. In cases like these, students end up having a huge sac of debt on their shoulders. Although it has become easy to avail of a student loan, paying the amount back is not easy for everyone. This is when student debt starts piling up. Therefore, to remove the financial barriers and increase access to education, utilising innovative aid strategies is crucial.
In this blog, we compiled a few tips for managing student debt and everything you need to know about it.
When going for higher studies in their home country or abroad, students often borrow some funds from banks or any government or private source. Thus, a student debt is the money you owe on a loan for educational purposes. A loan is generally taken to fund tuition fees, hostel expenses or other costs involved in pursuing your desired course. Depending upon the terms and conditions of the source, students can either begin the repayment once they graduate or while they attend school.
It varies across degree types and demographics. Also on the loan amount, the time it takes to complete the degree. Taking out students has become a popular practice in recent times as it makes college seem more affordable.
At the beginning, calculate your total debt, and the interest rate and check the repayment schedule. Some students have multiple loans so make a total for all of them. Your half work is done when you know the exact amount you have to repay. This helps you come up with a strategic plan to manage the debt before it starts haunting you.
Thoroughly review the terms of your loan and become familiar with every point. See if there is any opportunity for bonus points. It is important to see the interest rate and the repayment rules to plan your payback schedule. This way you will be able to avoid extra interest rates and penalties that may arise.
Unlike your college assignments, don’t wait for the deadline to start the loan repayment. The sooner you start, the less burden you get. Moreover, the interest rate in the initial days is also more in some cases. So beginning early can help pass this phase.
Simply follow the 50/30/20 rule to budget your income. If you are a full-time employee or part-time student, you should manage your income in a way that breaks down loan payments at the beginning. Identify your needs and wants to avoid unnecessary expenditure.
Sometimes other lenders offer a refinancing option on your running loan which reduces the interest rates. It is especially beneficial for those who have completed their studies and are now working. Since your earning capacity has increased, you can better negotiate the terms and conditions.
Creating a side hustle will help cover other expenses and pay more than the fixed EMI, therefore, reducing the debt. Today, there are a number of side hustles which you can pursue and add a few more bucks to your pocket.
You should actively look for scholarship opportunities offered by your respective college or government-funded schemes for different category students. Colleges often have scholarships for students with extraordinary participation in sports, students who belong to weaker sections, or someone who is an academic achiever.
The government has education loan subsidy schemes to provide financial assistance to students. The loan applicants can avail these in interest rate subsidies form.
According to the Department of Higher Education under the Ministry of Education, GOI, here are a few national scholarships for students in India:
This scheme was launched in 2008 to provide financial assistance to meritorious students. Their family income should be less than Rs. 4.5 LPA. This scholarship is given to 82000 students per year. It is covered under the Direct Benefit Transfer (DBT) and disbursed directly into the savings bank account of the applicant.
This scholarship aims to encourage the youth from Jammu & Kashmir and Ladakh to be admitted to colleges outside the UTs. 5000 scholarships are awarded every year to the deserving candidates. Applicant’s family income should be less than Rs 8 LPA and must have passed class 12th from UTs. This scholarship covers tuition fees and maintenance allowance. For general degree courses, the rate of scholarship is Rs 30,000 per annum, for engineering it is Rs 1.25 LPA and for medical courses, it is Rs 3 LPA.
Under this scheme, an interest subsidy is offered during the moratorium period. It has been functional since 2009. The subsidy allows you to pursue higher education in technical or professional courses in NAAC-accredited institutions only. The applicant’s parental income should be up to Rs 4.5 lakhs from all sources.
Student debt is a common challenge in today’s time with high-priced education. There are many funding schemes provided by universities and even the government which you can avail. You should manage and control your expenses while implementing the above-listed strategies. These financial aid strategies may or may not suit everyone’s situation but they can surely give a path to begin with. Student debt can be hard to repay, therefore, we advise you to research the scholarships and all the financial assistance provided by the college.
