How to repay your student loan with limited income


Rising prices are making higher education out of reach for many deserving students, forcing them to opt for student loans to finance their higher education.

The inflation rate in the education sector is higher than in many other sectors. As a result, rising prices are making higher education out of reach for many deserving students, forcing them to opt for student loans to finance their higher education.

Unless proper financial planning and investments are made well in advance, student loans become almost essential for studying abroad.

The Covid-19 pandemic, however, hit the job market hard last year, making it difficult for students to secure a suitable placement to repay the student loan on time.

“In the last fiscal year, nearly 10% of student loans issued by PSUs were classified as bad loans. The rising cost of education is crippling many dreams. In India, education inflation is between 11 and 12%. It is almost impossible to finance higher education without a loan,” said Saurabh Jhalaria – Head of SME and Education Loans, InCred.

“If we can’t avoid taking out a loan, we can certainly come up with a concrete plan to pay one off as soon as possible,” Jhalaria said, while suggesting the steps to pay off your college loan on limited income –

1. Choose a higher loan term, prepay if you have funds

If you opt for a guaranteed student loan, you can benefit from a term of 10 years and more. The longer term reduces the monthly EMI payment and gives you a more comfortable margin to repay your loan. The borrower can start repayment of the loan after the course ends or when he starts earning money. This is called a moratorium period. If you can allocate some resources to prepaying interest, especially during the moratorium period, you could benefit from a lower overall interest rate, thereby lowering your repayment cost.

Key Factors to Consider When Planning Funding for Your Child’s Higher Education Abroad

2. Start a side hustle or work part-time

Paying off your loan sooner will not only relieve you of a huge burden but will also free up monetary resources which will be diverted to more productive uses like investment. You should start planning for your loan repayment while in school. Work around your study schedule and find time to start a side hustle or part-time job, teach a class, sell your art online, offer graphic design services, etc. .

3. Live frugally

Increasing your income is only half the battle – the other half is making sure the extra income is used to pay down your debt. If your lifestyle swells in tandem with your income, the effort is wasted. At least until you get rid of your loan; you must live frugally with the basic necessities. Be good at budgeting. Look at what your necessary expenses are, eg food, rent, clothing, etc., and eliminate anything that is not essential. Distinguish between your wants and your needs and prioritize the latter. A new laptop can be essential for your studies and your career and therefore a necessary expense, while eating out every day is not.

4. Future income

It’s easy to overlap yourself with a loan for an expensive course that promises to be a lead to a rewarding salary package in the future. Avoid going down this path. Understand what interests you. If your interest leads you to the expensive course, give it a try. There are other factors that need to be considered. You should check if there is/will be a demand in the future associated with the course you are taking. The rules for working in the country, the legal hurdles you need to overcome to extend your stay, determining which visas you can apply for, immigration regulations, etc. Be sure to research and plan all of these things before you travel. Thus, you will have the means to repay your loan, while being happy and satisfied with your job.


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