A student loan, or higher education loan, helps students spread the cost of education. But before taking one out, it is important to understand how you will be paying it back.
HECS-HELP loans
Eligible Australian students are offered loans by the Australian government (Commonwealth of HECS-HELP loans) and payments can be deferred until you have completed your studies. You can, of course, make contributions towards this debt as you are studying but many students like to wait until they have full time employment.
Once you have completed your studies and are earning around $44,900, it is compulsory to start paying back your loan at a rate based on your income. Usually this is done by alerting your employer, and having them take the money out of your wages or salary automatically. Depending on how much you earn, 4-8% of your income will go towards your HECS-HELP debt.
Private loans
Private loans are usually offered by banks, credit unions or higher education institutions and require different rates and methods of repayment.
If you have received a loan from your university, it is likely the amount will be no more than $8,000 and repayment arrangements were made with the student services department at the time the loan was granted. Breaking this agreement may incur extra fees. If you are having trouble making regular repayments, speak to the student services department and ask for advice from your student union.
International student loans or private student loans from banks and credit unions usually need to be repaid at a monthly rate, and often before the completion of your course.
If you have several loans from private lenders you could consider student loan consolidation. Loan consolidation can lower the repayment rates of student loans as well as eliminating the hassle of having to meet payment deadlines for several companies every month.
However, students thinking of loan consolidation need to be aware that while it may make it easier to make your repayments over a longer period of time, you will be paying more in total.
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