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What's the Deal on Student and Graduate Loans?

What do you need to know about student and graduate loans? First, it's good to know that the interest on these loans is much lower than a typical personal loan. However, it's also important to know that a student or recent graduate can become locked into a relationship with a lender through these loans, so careful choices is imperative.

Many students leave college with huge loans, sometimes in the tens of thousands of pounds. The average student now graduates with £13,501 in debt from student loans. It is estimated that two-thirds of all undergraduates have to borrow money from the Student Loans Company. Once a student enters the workforce, the repayment of student loans begins. The good news is that student loans only grow at the rate of inflation, and the interest on student loans caps at 1% above base rates, which is still low compared to many other forms of debt.

Repayment of student loans begins the April after you graduate. Once you hit the £15,000 a year salary mark, nine percent of earnings above that goes back to paying off the loan.

Graduate loans are offered for recent graduates to cover living and working expenses. Many new graduates need to find a place to live and purchase appropriate work clothes. The graduate loan is designed for these costs. While this may seem like a great option, be wary. Graduate loans are much more expensive than student loans, although still less expensive than traditional personal loans.

You may want to consider alternatives prior to seeking a graduate loan. Your new employer, for example, may be able to loan you money for start-up costs with a much lower rate. Career development loans are another option for those who are seeking professional qualifications. These loans are available from most high street lenders at a lower interest rate.

Maintaining control over student debt is important as it may have a great affect on a person's ability to later purchase a home and invest in a pension. Because the daily financial stresses for students are great, many feel they need more loans to cover the expenses, which in turn leads to more years of repayment. One recommendation is to set up two accounts with the loan monies. Students then pay themselves with one account to the other.

While increasing student debt is a trend, the good news is that fewer graduates are now getting into further debt.




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