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School is calling…

How fast should you pay off your student loan?

For most of us, it was the concern for our children’s future that motivated us to make an uneasy decision to give up our habitual lives and start from scratch in a new country.

We realized that good education is the key to our children’s bright future. In this country, we are lucky to have a number of possibilities to finance the education of our children. There are grants that do not need to be paid off, and also student loans that are not required to be repaid while a student is still at school. All this looks picture perfect provided we have no doubt that the student will promptly find a job upon graduation and will start making good money right away. It is with these optimistic aspirations that most of our children start their student lives.

Now, let’s take a look at what reality looks like. Without going into much detail, we will just touch the top of the iceberg:

  • only 15% of graduates find a job in the field they were trained for within the first two years;
  • only 5% of graduates get high­ly-paid jobs that enable them to ag­gressively pay off their student loans;
  • as a result, the state has an un­paid student loan deficit of 1,3T.

I’m not going to analyze all the factors that led to the present situation, but the most important of all is the false idea of deferred payments based on mistaken assumptions. When discuss­ing a problem, Winston Churchill often used to say that a mistake might be much worse than a crime. Those who came up with the idea of increasing loan with a deferred payment, have actually introduced a time bomb. Such approach goes against all basic rules of planning including the major one: we can’t plan anything expecting things to develop in accordance with the best case scenar­io. It has been proven wrong numerous times, and it’s time we accept this simple rule and stop repeating the same mistakes.

The major mistake that needs to be smoothed over is the increase of debt during the years of studies.

The solution is obvious – start paying off your loan from the very first day of your enrollment at school. However, the possi­bility to delay the payment of debt gives us the opportunity to avoid making extra efforts in order to eliminate the debt and live a more or less comfortable life with no financial burdens. You can certainly use the potential of credit cards to start repaying the student loan as soon as possible. This will give you a chance to considerably decrease the total amount of loan by the time of graduation and make it much easier for a graduate to pay it off.

When your education is successfully completed, you are faced with a dilem­ma: how fast should you pay off your loan which has been accumulating during the 5, 7, or more years of stud­ies? It is, of course, a family budget problem. The first thing you have to determine is whether paying off your loan is possible and if it is expedient. In case you decide to pay off the loan, your best source is the equity in real estate property and pension funds. Credit cards potential should also be considered as it gives you 0% interest rate as well as the possibility to control the pace of repay­ment.

To sum up, I would like to remind you that creating an educational fund is an important part of your family budget. Emergency fund based on the credit cards potential may considerably facili­tate paying off your student loan.

joseph RozenbergPlease call me for more information: 847-520-7030.
email: mockbajr@gmail.com
site: www.drfgroup.net

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