The world of tuition fees, student loans and repayments is increasingly becoming a difficult one to understand. It wasn’t that long ago when university education was free, and now you have higher tuition fees wrapped up within a host of wider changes. All this has unfortunately (and predictably) resulted in a lot of confusion and a fair few myths.
It’s time to battle against the misconceptions and provide you with the information that you really need to know…
Student Debt Will Affect Your Credit Rating
If you’re already thinking about mortgages and the like in the not too far and distant future, the idea that your student loan could have a negative impact on your credit rating is probably a real concern.
But you’ll be pleased to hear that student loan debt isn’t actually viewed in the same way as other commercial debt like bank loans, credit cards and store cards, and so won’t affect your credit rating.
So, whether you want to get on the property ladder straightaway or leave it a while, this isn’t something you need to worry about!
You Must Start Paying Back Your Student Loan as Soon as You Graduate
Nope, not true either. You only become eligible to start repaying your loan the April after your course ends. And only if you are earning over the repayment threshold, which currently stands at £25,725 per year (£2,143 per month) if you got your student loan from Student Finance England and Wales. If you got finance from the Student Awards Agency for Scotland or Student Finance Northern Ireland then the threshold is £18,935 .
Once you earn over the relevant threshold, you’ll pay back 9% of any earnings over the threshold. So, if you earn £31,000 per year, for example, or £2,583 per month before tax, you'll only pay £39.60 per month in loan repayments. That's because you are earning £440 more per month than the threshold, and 9% of £440 is £39.60.
The money will be taken straight out of your pay at the same time as tax and National Insurance - before you receive it - so you probably won’t even notice it.
You Can’t Go to University Unless You’re Rich
As with many things in life, having money can help, but it shouldn’t – by any means – be a factor for getting a university education.
Firstly, it’s worth noting that all UK students are eligible for
to cover their tuition fees and basic living costs of university. student loans
There’s also further financial help available for eligible students in the form of maintenance grants, and scholarships and bursaries given out by the university and charity organisations. In short, there’s plenty of support out there, so don’t let the thought of money put you off.
Student Loans Will Put You in Debt for Life
It’s easy to see why students think they might be paying their debts off forever, but this just isn’t the case.
Yes, as you only pay off a small amount each month, the loan can take a while to be repaid in full. But it will go down eventually.
And if you still haven’t fully repaid your loan off after 30 years of graduating it gets written off completely!
All Undergraduate Courses Cost £9,250 Per Year
It’s true that universities can now charge up to £9,250 per year, but the reality is that many have chosen not to. In fact, in some ways, it’s created more competition which you might be able to take advantage of.
And don't forget how much you pay is also dependent on where you grow up. For example, if you are Scottish and you go to uni in Scotland, fees are only £1,820. And most Welsh unis charge £9,000, not £9,250.
In any case, the majority of institutions are offering bursaries and scholarships to help with the cost, so this should never be a reason to put you off getting a degree where, and in what, you want to study.
There is also the option of studying a
. These may cost more per year (around £11,000) but could save you up to £5,000 when compared to a three year degree. And yes, you can student loans to cover the full £11,000 fee each year. two year accelerated degree
There Are No Graduate Jobs, So Going to University is Pointless
Yes, the graduate job market is tough. But even though a degree isn’t a direct ticket to the job of your dreams, it’ll certainly
and show employers that you’ve spent the past three or four years learning and honing your skills. boost your employability
The economy and job market could also improve by the time you graduate, so getting a degree in the meantime could be a very wise move.
You Should Save Up and Pay Off Your Student Debt as Soon as Possible
It can be tempting to pay off your student loan as soon as you graduate, particularly if you get a good job and are earning a decent income.
However, it’s not necessarily the smartest move for most people. Student loans come with low interest rates, and putting any extra cash you save at the end of the month into a separate savings account could be a much better long-term option for making your money go further.
It probably won’t be long until you need to take out a commercial loan at much higher interest (such as a mortgage), so just make the minimum student loan repayments to save borrowing later at a much higher cost.
Hopefully we’ve helped you to get the facts straight and you now have a clearer picture of how student finance works. It might be a complicated beast, but it’s well worth knowing what you should be thinking about!
- Student Finance: Tuition Fees, Student Loans and Bank Accounts
- How to Make Your Student Loan Last