Managing student loans can be a crucial aspect of your financial planning. Most Namibian students or recent graduates have or have had loans that were funded by the Namibia Student Financial Assistance Fund (NSFAF). NSFAF has its loan repayment procedure on its website. In this article, we will look at five strategies graduates can consider when embarking on their student loan repayment journey.
Understand Your Student Loan
Familiarise yourself with the terms, interest rates, and repayment options for each of your loans. You can do this by first reviewing your repayment options, such as understanding the available repayment plans that your loan provider has and their terms. You should ensure that you know the minimum monthly payments for each plan. Calculate monthly payments. To help you do so, contact your loan provider to estimate your monthly payments under different repayment plans. You should also ensure that you learn about interest accrual on your loan, know whether interest accrues daily or monthly, and understand how this affects your overall repayment.
Create a Budget
Establish a budget that allocates a portion of your income specifically for loan payments. You can do so by calculating your total monthly payment. Doing so will help you know how much should be allocated towards the repayment. It is also important to set clear financial goals. When setting the goals, determine how quickly you want to pay off your student loans. This will help you allocate resources accordingly. One other way to include your student loan repayment is by allocating a percentage for loan repayment. Decide what percentage of your monthly income will go towards student loan repayment. The recommended range is typically 10–20% of your monthly income.
Explore Repayment Plans
Before choosing a plan, it’s a good idea to use a loan repayment calculator or consult with your loan servicer to understand how each option will impact your monthly payments and overall loan cost.
a. Standard Repayment Plan: Fixed monthly payments over a 10-year period (or 120 payments).
b. Graduated Repayment Plan: Payments start lower and increase every two years, usually over a 10-year term.
c. Income-Driven Repayment Plans: Monthly payments are based on your income and family size. These plans consider your income, family size, and sometimes other factors when determining your monthly payment amount.
Make Extra Payments
If possible, pay more than the minimum monthly payment to reduce the principal and save on interest. Making extra payments towards your loan repayment can have significant benefits for your overall loan repayment process. Here’s how it affects your loan:
a. Faster Payoff: Extra payments directly reduce the outstanding balance of your loan. This means you’ll pay off your loan faster than the standard repayment schedule.
b. Reduced Interest Costs: By reducing the principal balance, you’ll also reduce the amount of interest that accrues over time. This can lead to substantial savings in interest costs.
c. Shorter Loan Term: With extra payments, you can shorten the overall term of your loan. This means you’ll be debt-free sooner.
d. Increase in Future Financial Flexibility: Paying off your loan early gives you more financial freedom. You’ll have more disposable income to allocate towards other goals or expenses.
Utilize Employer Benefits
Some employers offer student loan repayment assistance as part of their benefits package. You can utilize employer benefits by following these steps:
a. Review Your Employment Agreement/Contract: Look through your employment agreement to see if there are any provisions for student loan assistance or repayment benefits. This might be outlined in your benefits package or mentioned separately.
b. Understand the Employer’s Program: Familiarize yourself with the specific details of your employer’s student loan repayment program. This could include the amount they’re willing to contribute, the eligibility criteria, and any requirements you need to meet.
c. Enroll in the Program: If your employer offers a student loan repayment benefit, take the necessary steps to enroll. This may involve providing documentation of your loans or completing paperwork provided by your employer.
d. Maximize Contributions: If your employer offers matching contributions or a specific cap on their assistance, try to maximize the benefit by making sure you contribute up to the employer’s limit.
e. Stay Informed: Keep abreast of any changes or updates to your employer’s student loan repayment program. This ensures you continue to receive the maximum benefit available.
Remember, the best approach will depend on your specific circumstances. It’s advisable to consult a financial advisor for personalized advice tailored to your situation.
