The disadvantages of not paying off student debt quickly

Why it’s often a good idea to make repayments as early as possible.

Student debt is a necessary part of life. But what happens if you don’t pay it off quickly?

The longer the repayment, the more interest you pay

Like any other type of debt you have to pay interest on student debt. The longer the debt remains unpaid, the more interest you will pay on it. The impact of this really depends on the debt in question. If it’s a loan with a low interest rate then not paying it off is unlikely to have the same financial cost as a credit card with a much higher rate of interest attached. When you’re applying for credit as a student – and when you’re working out how to repay it – make sure you’ve factored in how much that interest is going to cost.

You can’t use all your monthly salary

In most sectors graduate salaries are fairly modest these days and student debt repayments are really felt. The longer it takes you to repay student debt, the longer you’ll have monthly salary payments that are less that repayment amount. You might be resigned to this state of affairs but many people underestimate the impact on motivation and job satisfaction that it can have to still be making student debt repayments from your salary a decade after you graduate.

You might struggle to get other credit

This really depends on the size of your student debt, your income and your credit score. However, you may find that lenders aren’t keen to extend credit to someone who still has a sizeable student debt, in particular where the unpaid amount is pretty substantial. The ‘debt to available credit’ ratio is part of credit scoring for everyone and a large student loan debt can eat into this.

So, if you’re planning to apply for a mortgage, a small business loan, guarantor loans or even bad credit loans in the near future, the finance specialists Solution Loans suggest it’s a good idea to clear student debts as soon as possible.

You’re tied to the repayments

Some student loans do pause if you’re travelling or working abroad. However, most student debts don’t. So, for as long as you still have student debt hanging over you, the monthly repayments have to be considered. That means no year long travel safari, no taking a break to write or study without an income and no adventurous business ideas that need to be started on a shoestring – at least until the debt is paid off.

It’s just a bit depressing

It may seem like a great idea to spend your available income on other things and just let those debt repayments quietly roll out. However, after a few years that’s likely to become a little bit depressing. You might be more inclined to spend any extra income you have on holidays, clothes or a car but the reality is that, whatever you spend it on is likely to feel like a bad decision until the student debt is paid off and no longer accruing interest. It’s not much fun repaying student debt early but it does mean you can move on from your uni years and use your cash for better things.

The author has written and published articles on a wide range of topics including Small Business Advice, Tax and Accounting, Interior Design, House Renovation and Project Management.