SmileTutor Blog Students Advice For Students Student Loans: How Can They Affect You if Not Dealt With Properly

Student Loans: How Can They Affect You if Not Dealt With Properly

A lot of university students are in a love-hate relationship with student loans. We all love them as they help us continue our studies which could otherwise have been tough. But, a lot of us hate them because of the ever-piling interest rates and because of their ability to hurt our credit score.

But there are a lot of students among us, who do not understand the basics of student loans properly, and therefore, often end up landing on trouble.

Keeping in mind that student loans are going to determine your financial future, it is essential to understand how you can pay them off quickly, and wisely.

Here are some of the ways in which student loans might hurt you. Further, we will also discuss how you can manage your loan wisely and swiftly for a secured future.

Impacts Your Debt to Income Ratio

Keeping the technical jargons aside, this ratio is an indication of the amount of income that is taken up by your debt payments. If this ratio is too high, this would mean that a large part of your income is consumed by debt, and so, you don’t have enough money to pay off other loans.

This may disqualify you for an additional loan that you might want to take, a car or a mortgage loan, for instance. Further, if this ratio is higher, this also reflects that you don’t have enough savings left with you, which again affects your finances negatively in the long run.

Exclusive offer for first-time customers only!
Get 15% discount off your first lesson and no agency fees! Choose from a selection of reliable home tutors and keep learning even while at home. Claim this promotion today.

Makes it Difficult to Buy a Home

A lot of college graduates have to keep their dream of buying a home aside. Why? This is simply because they are already too much overloaded, and are not in a position to accumulate more debt.

While there are others who do not simply qualify for an additional loan because of their higher debt to income ratio.

Prevents You from Taking Risks

Naturally, when you have huge debts on your shoulders, you tend to look for stability. And this prevents you from taking risks even when you are in your 20s. Essentially, this means that you would end up choosing a stable company with limited growth when compared to a promising startup with better growth opportunities, just to cover up for the risks involved.

Additionally, having debts also prevents you from traveling or moving overseas. This interferes with your life in a big way, and even leads to frustration and disappointment.

Hurts Your Retirement Savings

This is a no-brainer. Since you spend most of your earnings in paying off the student loans, you hardly have anything left to contribute to your retirement savings. Not starting to save earlier for your retirement can hurt you financially.

So, what’s the solution here?

Control Your Debts

It is not too late yet. You can still exercise control on your student loans. Here is how:

1. Create a Budget

Be organized and adopt a systematic approach to proceed further. Create your budget and analyze your monthly spending. Cut off the unnecessary expenses and instead, start focusing on paying off the debt. Here is a bait: the sooner you get rid of your student loan, the sooner you will be able to focus on your life goals, which could be to travel overseas, or own a luxury car, or buy a house.

Further, it is much easier to cut down your expenses when you have just graduated from college. This is because once you start living your life frugally, there is probably no going back!

2. Get Part-Time Jobs

Part-time jobs can be another easy way to control your debts. You might start as a part-time tutor, or opt for other jobs. Undoubtedly, earning might be negligible, but it will prove significant by the end of the year.

Make it a point to put the extra money that you earn in your debt account each month. Another way through which you can accelerate the payoff process is by putting your tax refunds and bonuses towards your student loan.

3. Pay Off Penny by Penny

This is yet another effective way. You don’t have to wait for the big amounts to accumulate as that might never happen. Thus, even if you have a smaller or negligible amount with you, and if that satisfies the minimum payment limit of your loan account, go ahead and deposit it.

4. Monthly installment first

One of the best ways to avoid any charges and to prevent your credit score from getting hurt is to pay off the monthly installment first. Avoid making any other bigger expense until you have paid the installment. This will not only prevent you from bearing any extra charges, but would also take away any extra load from your shoulder during the rest of the month.

Struggling with your schoolwork?
Subscribe to get weekly study guides and exam preparation tips.
You have successfully joined our subscriber list.

Wrapping Up

We’re sure, this article would have helped you in understanding why paying off your student loan is necessary. Additionally, we also discussed a lot of ways through which you can maintain your budget while studying.

Got any queries? Write to us in the comments below.

Related Articles:

10 Personal Finance Lessons We Wish They Taught in School

The University Students’ Guide to Investing in Stock Market

Rum Tan

Rum Tan is the founder of SmileTutor and he believes that every child deserves a smile. Motivated by this belief and passion, he works hard day & night with his team to maintain the most trustworthy source of home tutors in Singapore. In his free time, he writes articles hoping to educate, enlighten, and empower parents, students, and tutors. You may try out his free home tutoring services via or by calling 6266 4475 directly today.