Paul*, 24, has left university owing $24,000 in student loans. He is offered a full-time job at a bank in the city. He is still living with his parents and contributes about half his salary to his parents. His starting salary at the bank is $2,800 a month. He is keen to pay off his student loan and is wondering about his options.

What should he do?

If Paul is able to clear his student loan completely in one go, he will be able to improve his credit rating.

This is because lenders take into account other loans when they lend money to an individual. But typically, people who are in the first jobs out of university will not be able to pay $24,000 in full. So, he has to consider how long he'll need to pay off the loan.

If the monthly payment is small, the repayments may stretch for a few years. This would mean that he accrues higher interest charges. It may be better for Paul to decide to pay off his loan more quickly, say in two years. The monthly payments may leave him with less disposable income or savings but in two years, he would have cleared his student loan. He also won’t have to pay as much on interest charges. 



* Names are fictitious