Coming from a background where it is obvious that taking a loan is the only option for international education, debt management is an essential skill to learn. The day the students get on the plane is the day they get into debt because of tuition fees, cost of living, student accommodation and more.

After all, living away from family for studies, there are plenty of things to take care of. And, to take care of such things, students always end up taking loans a.k.a crushing debt. This is where we have got you an interesting aspect for you to know everything about debt management. So, why wait for more? Keep on reading to find what all you can expect as students in UK in terms of debt!

What is Student Debt?

Before solving the problem, you need to understand the basics, isn’t it? In the same way to get out of debt you have to understand what debt is. Here are some pointers you should know:

• Student debt happens when students ask for student loans to pay the tuition fees, student housing, books, food, and other expenses. This usually creates financial pressure on students which often leads to borrowing money and this starts the cycle of student debt.
• There are various types of student debts like student loans, credit card debts, overdrafts, or even personal loans.
• Debt management is very important and without a strategy debts grow more due to interest, late payment, poor spending habits, etc.

How to Manage Debt as a Student in UK?

As you already know, managing debt is a very important skill just like knowing tips for budgeting. Here are some of the top strategies to manage your debt as a student in UK:

1. Creating a realistic budget
2. Differentiate between needs and wants
3. Pay more than the minimum amount
4. Use student discount for freebies
5. Avoid high-interest borrowing
6. Consolidate or refinance your debt
7. Increase your income
8. Build an emergency fund
9. Prioritise high-interest debts first
10. Seek financial guidance

Obviously this is not where our blog ends! So, let’s discuss each of these points in a little more detail.

Creating a Realistic Budget

• Creating a budget is very important so your first step to debt management. You should be tracking your monthly expenses like allowance, part-time job, scholarship, etc. Make a list of your fixed expenses like rent, bills, tuition fees.
• Allocate the fund for variable express like food, transport, social life, etc. You can also use budgeting apps like MInt, YNAB, or PocketGuard to stay disciplined regarding your budgeting.
• As we already said, budgeting is the first step in debt management since it prevents overspending.

Differentiate Between Needs and Wants

• To get out of your debt, you have to differentiate between your needs and wants. The needs usually include rent, tuition, groceries, and public transportation. Whereas, wants are clearly those things which give your happiness such as dining out, branded clothes, subscription, gadgets, etc.
• Cut down on unnecessary expenses to free up money for debt repayment because this is how you will start getting out of your debt.
• Establish a mindful spending habit because it is a sustainable way to get out of debt as a student.

Pay More Than the Minimum Amount

• You must be thinking why pay more than I owe, but it doesn’t mean that. Minimum payments only cover interest, not the actual debt and paying extra each month reduces the principal amount.
• A big misconception is small payments do not make any difference but even small additional payments help cut interest costs over time.
• You can consider the snowball method which means paying the smallest debt first or you can also use the avalanche method which means paying highest interest debt first.

Use Student Discount for Freebies

• Your student ID is like a weapon. So, take as much advantage as you can from it. Use free resources like university libraries instead of buying books.
• You should also access free software through your university instead of paying for a subscription.
• Every pound saved is a pound that can go towards debt management.

Avoid High-Interest Borrowing

• Debt is like a trap and the deeper you go in that. That’s why knowing tips to debt management is necessary to avoid getting stuck more than you are. Pro Tip: Stay away from payday loans and unnecessary credit cards.
• If you are in a situation where you have to borrow, then compare student-friendly loan options with lower interest rates.
• Make sure to use overdraft wisely and only when necessary and managing interest effectively is crucial to control student debt.

Consolidate or Refinance your Debt

• Debt consolidation means combining multiple debts into one manageable loan and refinancing can lower interest rates, reducing long-term costs.
• You should also check if your student loan provider offers refinancing or forgiveness programs.
• Make sure to always compare options before refinancing to avoid hidden fees.

Increase your Income

• The best way to manage debt is to pay off your debt and to pay that you have to increase your income. Take up high paying jobs without a degree such as part-time jobs, freelance gigs, or tutoring. This usually helps a lot to cover expenses, search for a job which pays you and you have interest in that as well.
• Explore online opportunities like content writing, graphic designing, or digital marketing. You can even join seasonal jobs during holiday and it can help in providing extra income.
• The more you earn, the faster you can pay off your debt.

Build an Emergency Fund

• Emergency fund means a fund which you can use in times of crises. After all, emergencies don’t call and come. This is basically about saving some money every month so that when you face any problem you can solve it. The best way to start is to start putting a small amount aside, let’s just say you start saving £10 every month.
• Saving some money or keeping an emergency fund prevents you from relying on credit cards for unexpected expenses.
• Having savings reduces financial stress while managing debt and emergency funds are a long-term tool for financial stability for students.

Prioritise High-interest Debts First

• As we already said above, the avalanche method focuses on paying high-interest debt first. So, pay off debts with the highest interest rates like credit cards, personal loans, etc.
• This can help you in preventing debt from snowballing unnecessarily.
• Once you clear the high-interest debts, then you can focus on lower-interest student loans.

Seek Financial Guidance

• Many universities often provide free financial counseling for students and act as your debt advisor. Speak to a financial advisor if debt feels unmanageable.
• You can also seek help from online debt management tools and student support groups.
• Guidance ensures you choose the best repayment plan for your situation.

What Are the Common Mistakes Students Make with Debt?

Many students make mistakes with debt which cause them more debt. Here are some of the top yet common mistakes you can avoid as students in UK:

• Ignoring the debt until it grows uncontrollable.
• Borrowing more than they needed.
• Not keeping track of spending and wasting the money is unnecessary.
• Relying heavily on credit cards.
• Skipping payments, leading to penalties.

Conclusion

Debt doesn’t have to control your student life. With smart budgeting, prioritization, and disciplined repayment, you can control your debt and repay your debt even early. The earlier you adopt the strategies, the smoother your financial journey will be. Moreover, it is important to repay your debt in a timely manner. So, it doesn’t become a burden for you. Make sure to even borrow if it is actually needed.

And, to find affordable, flexible, and short-term student accommodation in UK, head to your favourite, Uninist today!

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