Although it is a common practice to education loans to finance your tertiary education in Hong Kong, that does not mean you should be careless with it. Any mistake that you make while borrowing a loan can compromise your financial future.
According to an article published on SCMP.com, the student loan scheme in this region may be helpful – but it is also very easy to exploit. The article revealed that there are 13,000 default cases in the past three years. This is equivalent to HK$200 million worth of unpaid student loans – at least, this was the figure during its peak.
Apparently, the bulk of the unpaid debts came from them – which is the programme that provided students with financial aid through a loan. The target student borrowers of this scheme are those who are working already and yet would like to enroll on a part-time basis. Although the loan offers a low-interest rate, a lot of borrowers are still defaulting on it.
Don’t get it wrong. There is nothing wrong about study loans. In fact, one can even classify it as a good debt. When it is used responsibly, this type of loan will help you improve your earning capabilities. A higher level of education will open more doors for better employment and will give you the right to ask for a higher compensation.
Though it may be a good debt, that does not mean it cannot compromise your future. It is very important that you approach this type of debt with a sound mind and a thorough analysis of your payment options.
How to apply for study loans
Choosing the right study loan is half the battle when you are trying to finance a university level education. After you graduate, that is when the real work begins. This is why you need to be very wise when it comes to your study loan application. Here are some tips that will help you make this decision.
Know how you will pay it back.
You have to be wise about how much you will borrow. Try not to borrow too much loan if you can live a simple life while studying.
Do your research about the loans.
Always know all the options available. This will allow you to make a thorough decision. You may be missing out on grants that you are eligible for. These grants, since it does not require repayment, will lessen the need for you to borrow a lot of student loans. Not only that, it is important to understand the limitations, restrictions, and various fees that you have to pay. This will help you budget your money.
Make sure you finish your course.
Failing to complete your education will not forfeit the student loan that you borrowed. You will still be required to pay it back. Make sure the course you will enroll in is really something that you can complete and enjoy working on for a very long time.
Ensure that your course and school is eligible for government programmes. Otherwise, your only option would be to borrow from private student lenders. This may end up costing you more because of the higher interest rate.
Research the job opportunities of the course that you want to enroll in.
Admittedly, this would be tricky because it involves making assumptions about your future career. However, reading about the current market trends in the industry you want to enroll into will give you an idea about your earning capabilities if you push through with this course. You want to make sure you can find a job after you graduate. This job will allow you to pay off the loan.
Live a frugal life.
It really helps to regulate your spending while you are a student. According to an article published on educationpost.com, living a frugal life while you are in school can help you be wise about this loan. The more you spend while studying, the more debt you will pay when you graduate. You want to keep this loan to a minimum so be very cautious of how you will spend on living expenses while studying. If possible, spend your education loans on school-related expenses only.
Try to get a part-time job.
It is hard to become a working student but it can be rewarding the long run. You can benefit from the extra money that you will earn because it lessens the amount that you have to borrow. At the same time, you can also benefit from the work experience that you will get.
Tips to help you repay your student loans
Being wise about your financial choices while you are still in school will really help you pay off your loan after graduating. But beyond that, you need to make the right choices once your education loans enter repayment.
Here are tips that can help you make repayment easier:
Keep on living like a student.
Spending your first paycheck on clothes, gadgets, or a holiday is very tempting. However, that is not really a wise move – especially if you owe a lot on your student loans. Keep your expenses low – as if you were still a student. You are not really in the right financial position to make spending sprees at the moment. Live in a cheap rental with flat-mates if you can find trustworthy ones. Cook your own meals if that means you can save on your food costs.
Hold off major purchases.
This includes buying a house, a car, or spending on an expensive holiday. You deserve to spend your money and build up assets but not while you are still paying off your student loans.
Put all your extra money on your student loan payments.
If you earned anything extra or you were given a bonus at work, it is advised that you put that towards your education loan payments.
Keep a tight lid on your other debts.
We are talking about credit cards, of course. While you can use it, make sure you pay it back in full to avoid paying the finance charges. That way, you do not have to share your limited resources to pay off this high-interest debt. Instead of paying off the student loans faster, you have to put some of your income towards other debts. It can make your progress slower than it has to be.
Build up your emergency fund.
Finally, you are encouraged to start saving up for an emergency fund. Sometimes, the lack of emergency fund can force you to borrow more money. Unexpected expenses have a way of surprising us and putting us in a complicated situation. In our panic, we look for the easy way out – which is to borrow money to get us out of a tough financial spot. We all know how that does not really solve anything. In fact, it can only make things worse. To avoid this scenario, build up your emergency fund so you can rely on it during unexpected events.
Remember this, the faster you pay off your education loans, the earlier you can start investing in growing your personal net worth. So be wise about your financial choices from now on.
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