Student loans are essential for most students in higher education. But there are so many misconceptions and myths going around, things can get a bit confusing.
Whether you’re a current student, a recent graduate, or someone considering higher education, understanding the truth about student loans is crucial to getting a hold of your finances at university. To save you the stress, we debunk the common student loan myths to help you make informed decisions about going to Uni.
The good news is, you don’t need the cash up front to pay your Uni tuition fees. Once you’ve
applied for a student finance tuition fee loan
and your application has been approved, the Student Loans Company will look after paying your University tuition fees directly. Of course, if you’re lucky enough to have the money lying around you have the option of paying fees direct.
Some think clearing their student loan debt off early is the ideal solution. Compared to a lifetime of debt, it does seem to make sense. However, student loan debt is different to other types of debt. Student loans have some of the best repayment terms you will ever encounter, especially when compared to other commercial loans. The interest rates you are charged are based purely on what you can afford in line with your earnings. Other banks & loan providers don’t take this into consideration.
You should also consider the chance that your loan might get written off before you complete all your payments! You’ll never be able to predict how much you’ll earn once you graduate, so it’s worth having a good think about whether you want to put your savings towards paying the loan off early. If you are expecting higher earnings, and can afford to, it might make sense to save on the interest accrued over time, and pay the debt off early. But for those not too sure, we think it’s better to keep your savings for something else.
Are you wondering when your student debt will be wiped? The Student Loans Company will wipe your debt clean when 30 years have passed. This timing starts on the April you were first due to pay, after your graduation. What's more, if you never earn over the earnings repayment threshold, you’ll never have to repay a penny.
This one is a pretty famous myth we’ve heard for so many years, and sadly it's not true. Moving abroad does not mean you can dodge your student debt. The Student Loans Company will make you pay, wherever you are. You might incur penalty charges if you try to avoid paying what you owe.
It’s good to remember that your earnings might change if you are working abroad. As repayments are based on your earnings, your repayments might change too. So make sure to keep Student Finance updated with your current situation and earnings.
Your student loan debt is wiped if you die or are incapacitated. We could probably think of better ways to avoid paying all your student debt back, but it’s true. Your debt is also wiped if you’re permanently disabled in such a way that you’ll be permanently unfit to work.
Student Loan Repayments
taken automatically from your salary, before you even receive it into your
. It works just like a tax or your pension contributions.
This means that if you’re employed, it’s not your responsibility to organise your student loan repayments. As it’s your employers responsibility to organise repayments, there won't be any debt collectors chasing you to cover what you borrowed. It’s all looked after automatically.
If you’re self-employed, your student loan is paid back at the same time as your income tax payments and your national insurance contributions. Your student loan repayments are included in calculations when you level everything out through your yearly HMRC self assessment returns.
Under normal circumstances, financial transactions and credit relationships are included on your credit file, and contribute to your credit rating.
Student loans and student debt are not generally included on your credit file. So thankfully, this means that students who leave Uni with a lot of debt can still have a good credit score.
The only time that you will be asked to provide information on your student debt, is when it comes to borrowing larger amounts of money, like when applying for a mortgage.
Yes, it’s true. Having a student loan is worse than not having one when it comes to getting a mortgage. However going to Uni often leads to earning a higher salary, which more or less cancels out this struggle. If you’re concerned about your student debt putting lenders off, as we mentioned above, student loans don’t appear on your credit file, so won’t impact your ability to get a mortgage.
However, Student Loans impact your affordability rating to be able to make repayments on a mortgage. As you’ll obviously have lower take home income, due to making repayments for your student loan, you’ll be assessed as only being able to make smaller repayments.
If you go bankrupt sadly you’ll still have to repay any student loan debt you have. We know, as if things weren’t bad enough that you’re bankrupt, you still have your Uni debt. As this debt is only repaid after you earn a certain amount each tax year, you won’t have to repay your student loan if you are unemployed or a low income earner.
It’s inevitable that whoever you are, as a student, you’ll most likely be trying to figure out ways of saving money. There are all sorts of ways you can
, and so many more ways you can
. If you’re trying to figure out how
Student Loan Repayments
work, click here. If you need more advice and information on Student Finance in general, check out our
Student Finance Guide
Aside form that, you should always be thinking of opportunities to find yourself a Student Discount. Most stores up and down the country offer discounts to students, and if you’re going to have to spend money anyway, so you may as well try and spend a little less. Fortunately, you don’t have to look far to find your next discount. We bring together the best
Student Discounts & Deals
available to students nationwide, on everything from fashion, laptops and tech, food and eating out, travel costs, streaming services, and everything else you can imagine.