The recent increase in tuition fees means that a lot of people who are not yet even attending university are concerned about whether they will be able to pay off their student debts. Many current students and recent graduates are also concerned about repaying their student debts. Currently, even on the lower fee structure, the average student leaves university with debts from several sources, as maintenance loans on their own are rarely sufficient to cover even basic costs. So how should a conscientious ex-student go about paying off this student debt?

Advice from the National Union of Students (NUS) is that it is currently generally inadvisable to overpay formal student loans (that is, money borrowed through the Student Loans Company (SLC) from the government), because the interest charges on these loans are very low. A decent return on savings (such as with a top-rate ISA) will produce more money for an investment than the equivalent reduction in interest caused by overpaying a student loan unless over half of the amount outstanding can be repaid at once. Additionally, standard repayments are handled by salary deduction once earnings reach a set level, so they do not usually require any extra investment of time or effort.

Other forms of student debt are, however, very different. While many banks offer students interest-free overdrafts, this facility can disappear very rapidly on graduation, leaving a large chunk of money to be found in one go. Credit cards and other forms of loan can also see changes to interest rates once a student’s status changes, so these debts need to be both minimised during the period of study, and paid off as rapidly as possible on graduation.

Interest and repayment terms for those in employment are often very different to those for students. Talk to your providers (usually your bank) as soon as possible, preferably before you graduate, to see if they have any graduate offers that could help you manage your finances. Make sure that every relevant company has a contact address for you, to make sure that any requests for immediate repayment are received, and don’t ignore any communications of this sort.

Secured loans are another option for paying back debt. Otherwise referred to as debt consolidation loans or homeowner loans (due to the fact a property is often used as collateral) these loans will combine debts such as over drafts, student loan repayments, credit card debts into one sum with a single interest rate. Due to the fact many people fresh out of education are not property owners these loans are normally secured against a parent’s home.

The best situation is when graduates are able to go straight into a relevant and reasonably paid job from their studies. If you are lucky enough to be in this situation, make sure that you budget debt repayments for your overdraft, credit cards and other non-governmental loans immediately so that you do not become used to having the extra money. The sooner these debts are repaid, the less interest you will accrue, and the sooner you will actually be able to enjoy your earnings.

If you are not able to get a job in the relevant field immediately, consider your options carefully to avoid compounding your debt. Talking with providers is key here, and even making small payments can help to reduce the overall debt burden, and may encourage lenders to maintain lower interest rates and higher borrowing limits. Use your experience of economising during your student life to help you to find ways to save money to make these repayments. While it may feel unfair that you have to continue to live on a budget, it is better to do this than to run up huge credit card bills or to roll-over debts to payday loan companies, as these forms of borrowing are ill-suited to funding everyday living costs. For IVA advice, visit Debt Free Direct today.