Navigating Student Loans & Debt: Financial Planning for Graduates

Graduation is one of the proudest moments of everyone’s time at university. It offers yet another fresh start after multiple years of hard work, and presents you with boundless opportunities to keep growing as a person. Unfortunately, one thing that’s often forgotten about is the issue of financial planning for graduates that actually works. Student loan repayments can start once you begin earning, and financial uncertainty can creep up on you almost immediately depending on your circumstances.

Thankfully, we’re here to help. In this short guide you’ll learn about all the key details that’ll help stabilise your financial situation after graduation, so you can focus on moving forward in your studies or heading into full-time employment.

What is Financial Planning for Graduates?

We’ll keep this bit simple. Basic financial planning means taking control of your money and making it work for you as best it can. For graduates, this can involve a number of things:

• Understanding your student loans and when they need repaying.
• Managing every day living costs.
• Building credit without sinking into debt.
• Setting attainable goals for savings or further education.

Step 1: Understand Your Student Loan

Before creating a plan, you need to first learn about what kind of student loan you have, and when it will need to be repaid.

UK Student Loan Breakdown

Yes, unfortunately your student loan isn’t free money. It will eventually need repaying once you start earning. If you’re on a Plan 2 or Plan 5 loan (most common in England), repayments begin the April after you graduate. This only applies if you’re earning above a set threshold, which is currently set at £27,295 per year at the time of writing. As a graduate you’ll pay 9% on anything earned above this figure. If you earn less than this, you won’t have to pay any of your student loan back.

For international students or those with overseas loans, your repayments may look a little different. Always check these with you lender or funding source before making any repayments.

If you’re unsure on how much you owe, or when you’ll pay, use the official Student Loan Repayment Calculator to determine your projected payments.

Step 2: Budgeting Smartly

Effective budgeting isn’t about cutting out everything you love. It can be about simply knowing where your money is going so you can make better decisions that align with your goals.

Try the 50/30/20 Method

• 50% on needs such as rent, transport, and bills.
• 30% on wants such as meals out, subscriptions, and nights out.
• 20% on savings or debt repayments.

Budgeting apps such as Monzo or Emma can help you budget smarter. They present your finances in a colourful and engaging way that hopefully makes it less daunting of a subject.

Step 3: Tackle Debt Without Shame

Plenty of students leave university with more than a just a student loan to repay. Things such as credit cards, overdrafts, and pay later schemes all contribute to a financial mountain that needs climbing. It happens, no judgement.

Here’s What You Can Do:

• List everything you owe
• Pay off high interest debts first (particularly credit cards)
• Avoid payday loans, they are a trap that only briefly solves your problems.

As a graduate, you aren’t alone in owing money. According to the Financial Conduct Authority, 38% of 18-24s struggle with debt. It’s very common, and manageable if you’re disciplined.

Step 4: Build Your Credit Future

Credit scores may have once seemed like some far off adult thing you’d never need to worry about, but when it comes to financial planning for graduates, it’s vital to grow yours.

• Set up direct debits to always pay bills on time.
• Register to vote at your current address, even if you move often.
• Have a credit card, but use it responsibly and pay it off in full each month.

Step 5: Save Like a Graduate

You don’t need to try and save thousands in a month. Set yourself a realistic savings goal and put a little bit away each month to make it happen. You’ll take more satisfaction from doing things this way.

Easy Wins:

• Round up spending into savings pots with your banking app.
• Open a Lifetime ISA (LISA) to receive a 25% bonus from the government.
• Use alumni/graduate discounts for where possible.

Saving for major life objectives can be hard, so set a smaller goal alongside them to give yourself a fun target to aim for. Perhaps a holiday or a even new golf club?

Extra: Utilise Free Resources

There’s no shame in needing some extra help when it comes to financial planning as a graduate. Resources such as Money Saving Expert post regular guides on how to save and where the best deals are for certain things. You can genuinely save a heap of cash over time through using their tips.

For graduates in particular, most UK universities offer financial advice even after you leave. You can also find helpful advice through social media pages, community centres, and charities.

If you are enduring major financial struggles, reach out to family and friends. It also helps to speak to your bank, as they have ways of easing money problems without you being penalised too heavily.

Quick Wins: Things to do Today

• Log into student finance and check your balance.
• Set a calendar reminder for your loan repayment date.
• Download a budgeting or savings app.
• Talk to a friend if they’re happy to discuss finances.

Continuing Your Studies?

If you’re planning on continuing your university studies beyond graduation, take a look at more of our helpful blog posts that will make your next step easier.

Financial Planning for Graduates, Sorted

Money doesn’t need to be a mystery, or something to fear. With a few minor changes of your mindset, you can turn your finances from stress to success. Wherever you’re starting from, you’re not behind, you’re building.

Let this be the beginning of your saving journey.

Got questions or tips to share? Reach out to your university support team or read more on the Citizens Advice Bureau’s website. We’re all constantly learning about money and how it works best for us as individuals.