Living With Student Loan Debt

In Australia, the number of people with outstanding Higher Education Loan Program (HELP) debts has been steadily increasing year on year by around 8-11%, and as of 2017, the average balance sits at AUD20,300, according to the ATO.

While having student debt has become very normalized, living with it, managing it and enjoying life’s big moments with it hasn’t. Can your student loan stop you buying property?! Moving overseas?! Taking time off to have a family? Fear not. We’ve got your questions answered.

Can I move overseas with student loan debt?

Wondering whether you can get your beach party on (post-COVID, of course) with your debt chugging away in the background? Good news – you sure can! In countries like Australia, New Zealand and the United Kingdom, student loan repayments are income-contingent. If you move overseas, you just need to let your student loan provider (or tax office) know what you’re earning, so you can repay your loans accordingly. You’ll either do this by setting up a direct payment, logging into MyGov (Australia), or going online to make payments manually.

The main difference to be aware of when paying your student loan from overseas is that you’re responsible for making your repayments, rather than making them through your employer like you would on home soil. Don’t go thinking you can simply hide from your loans while overseas. There can be hefty fees or default repayments applied if you’re found to have gone overseas without notifying the appropriate loan provider – honesty is always the best (and safest!) policy.

What if I’m not earning overseas?

If you’ve gone overseas with an outstanding student loan balance but you’re not earning an income, generally you won’t be required to make payments towards your loan – providing you’re from a country with an income-contingent repayment system. That said, you’ll likely still be incurring interest on your balance, so you may wish to make voluntary repayments to maintain your progress. Plus, even if you’re not earning, you’ll still need to notify your provider or tax office that you’re overseas, and confirm you’re not making any assessable moola.

Will my student loan stop me getting a mortgage?

Looking at your student loan balance and panicking you won’t be able to buy property until it’s paid off? Don’t panic. In most cases, lenders assess your borrowing capacity based on your monthly repayment liabilities, not your balance. That means, if you’ve got a loan balance of $35,000 but are only required to pay $200 per month, it’s the $200 that they’ll assess you on, not the $35,000. So if you’d been fretting about paying down the full balance before you buy, you can breathe a sigh of relief.

That said, the more you earn, the higher your repayments tend to be. For that reason, if you’re making good progress with your student loan and only have $5,000 left to pay, it could be more beneficial to pay off the remaining balance and reduce your monthly liability to zero. That’s because the balance vs. monthly payments logic works both ways. It doesn’t matter how small your balance is, if you’re liable to pay $800 per month towards your loan, a lender will assess you on that high monthly expense, not the fact that your loan is almost paid off.

What about getting a car loan?

When you’re making big adulting moves while living with student loan debt, try shifting your attention to your monthly repayment obligations over the balance itself. If you want to apply for a car loan, mortgage or any other type of credit, once again it’s generally the monthly repayment liability that’ll impact your borrowing power. When assessing whether you can afford to take out any kind of loan or take on any ongoing payments, you’ll get a greater indication of your position by looking at your repayments rather than the balance itself.

It just feels like I’ll never pay it off – how can I stop these fears from getting me down?

We hear you, and research has shown that student loans are placing a huge weight on the shoulders of younger generations. While debt can be a worrisome topic, remember that you’re not alone. Student loan debts are incredibly common, and for many professions, a near-essential part of our career development. Some other tips that can help you feel less afraid of your student debt:

• See it like a tax. In countries where student loan repayments are on an income-contingent basis, it can help to view it as a ‘graduate tax’. While still an unfair disadvantage and high price to pay for higher education, it removes some of the ‘debt’ narrative from your loan and can improve the way you feel about it by treating it like other taxes we all pay.
• Remove the emotional association. Often we can fall into a pit of regret with student debt, wishing we hadn’t gone to university, wishing we’d taken a third job to pay it upfront, or saved more from our paper route as a teenager. Accepting the reality of student debt and detaching your emotions from the big scary number can give you a sense of ease when dealing with it.
• Don’t let it hold you back. As we’ve talked about in this article, you can still make all the boss moves you want to in life, without your student loan ruining it! Instead of letting your loan hold you back, deal with it like a bill and then get back to living your best life.

Emma Edwards is a finance copywriter and blogger, on a mission to humanize the financial services industry by creating meaningful content that’s accessible and empowering. You’ll find her penning money tips at her blog, The Broke Generation, sharing financial insights on Instagram, or injecting life into content for her business clients.