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Monday, April 27, 2009

Living With Student Loan

Nowadays, most fresh graduates will be burden with debts, even the moment they stepped in the varsity world. I'm quite positive that those not coming from a well to do family will need to get student loan or education loan. Students from Malaysia can apply for this student loan or education loan from a government body, PTPTN.

When I graduated three years ago, I directly have to start my payment for the education loan. The terms and conditions of the loan is to start the payment 6 months after I graduated. This applies to all the university students getting student loan from this PTPTN - which means that we have to get a job within 6 months after graduated. Well, for those getting jobs within the first six months after graduation, how many of them are actually paying back their student loan? I believe majority of them are not paying or just paid maybe once or twice the installment. Not that I want to criticize or condemn anyone, but I do believe we need to pay back this student loan that allowed us to get tertiary education. Without this repayment from us, how is PTPTN going to give student loans to others? Anyway, back to the real topic, living with student loan - if one delay his or her payment, the interest will accumulate, then one will starts to blame the government for charging high interest. I was wondering, is 3% from the remaning amount is high? For me, it is an ok amount, which is why we need to start paying as soon as possible and pay as high as we can afford so that the interest will be lowered drastically.

Financial management and discipline has a lot to do with not repaying this loan. If one does not have discipline or good financial management, he or she will always face with shortage of money, thus not repaying loans because there is no extra cash left with him or her at the end of the month. One can start by setting aside some amount of money for student loan repayment. By doing this, at the end of the month one will still have the money for loan repayment. Our income are fixed, thus we need to spend less than the income in order to have extra money for our student loan repayment.

Rule #1
Income - Loan Installment = Expenses + Savings

The above rule always apply to all of the working class. Or better still

Rule #2
Income - Loan Installment - Savings = Expenses

Ever wonder what is the different between the two rules? According to maths formula, both are the same, but from financial management stand point, the two rules are different. Rule #1 means setting aside loan installment and one will get expenses + savings portion, so this mean one does not necessary have savings. Rule #2 meaning setting aside loan installment and savings after income, then spend the remaining one. Thus with rule #2, one will be able to pay off loans as well as having savings.

In conclusion, we need to have very good financial management so that we can start paying off our student loan as soon as possible so that PTPTN can continue to provide student loan for those needy.

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