How to pay back your student loans

A student loan is intended to help students pursue education. It helps them pay for the tuition fee, books and living expenses while pursuing a degree at a university in New Zealand. The requisite funds can be borrowed from the government at a substantially low rate of interest. In many countries, the government and financial institutions have their own laws on getting student loans and repayment policy. How is a student loan different from a student allowance? When you get an allowance for your education you don’t have to pay it back, whereas a student loan has to be paid back. Student loans are unsecured loans. You do not have to present any asset or investment as security to get the loan. Even what your parents earn does not affect your standing to get a loan to study. For students under the age of 18, parental consent is mandatory to get a loan. Student loan consists of three parts. The first is the tuition fee, which is compulsory fee. Then a lump sum is given to take care of buying course books, stationery, travel, equipment related to the course. The loan also gives you the option to borrow for your living expenses, which would include food, stay and other basic necessities. While applying for a student loan, you can choose for all three parts or if you are getting student allowance then you can reduce your loan amount. If you are a student and working too, you can ask for an exemption from repayment till you finish your course. Once you complete your course and get a job, the loan can be paid in instalments periodically. Repayment of loan begins when your pay (before tax) is over the pay period repayment threshold. When you choose a tax code, you will get a repayment code for your student loan. Your employer will then deduct the loan amount as well as income tax from your salary. In case your income is less than $19,084 for the year, then you can consider a repayment deduction exemption. If you are self-employed or receive income from rent or dividends then your repayment option will depend on the income assessment made each year. If you go overseas for an extended period of time, then you will end up paying interest on your loan, thus increasing the loan amount. Repayment can be done half yearly in lump sum amounts or paid on a monthly basis. If you have more than one source of income, you can relook at the repayment and speed it up by paying more every month. With most loans, the longer you have them, the more interest you have to pay. In case your loan is interest free, then you can pay minimum every month without the fear of increasing your debt. A word of caution! Remember that your student loan repayment process may affect your ability to borrow in the future.