Most students who go to university from England, Northern Ireland and Wales will have to pay tuition fees with a student loan. Students from Scotland who stay in Scotland to study do not have to pay tuition fees at all, and those with wealthier parents or who have saved the money themselves may be able to avoid taking a student loan as well. This isn’t to say that taking a student loan is a bad thing, however. They’re very different to the loans you can get on the high street, so make sure you know the full terms and how they will affect you in the future before you apply.
Getting Credit in the Future
When you borrow from a bank, a loan company or a mortgage provider, they will look at your credit history to get an idea of how you deal with paying back money that you owe. Other debts can affect your likelihood of being approved for credit, but thankfully student loans do not appear on your file. Some mortgage providers will ask if you have a student loan, but as university students tend to earn more once out in the workplace, this is usually cancelled out as a concern.
Due to this, a student loan will not affect your chances of getting a bank loan or credit from another company, such as a guarantor loan, once you have a steady income to make repayments with.
Paying it Back
How you pay back your student loan will depend when you went to university. For those who have already been to university and graduated in or before 2012, you’ll only start paying once your income reaches £16,910 per year, and even then you’ll pay just 9% of anything earned over this amount. This could mean paying just 68p each month. For those who graduated after 2012 or who are planning to go to university this September, the loan you receive will not have to be paid back until you start earning £21,000. If you dip back below this level of income then you will stop having to make payments, which ensures a student loan will never be a crippling debt which cannot be sustained. If you are taxed at source, all loan payments are taken from your pay packet automatically - just like income tax - so you don’t have to worry. For many graduates, the amount taken will be negligible and it should not severely affect their income.
How Much Interest Will I Pay?
For those who started university before 2012, the interest on their loans simply goes up with inflation, meaning that although the amount they pay overall will be more on paper, the final cost will be the same in ‘today’s money’. For those starting university after 2012, the interest is calculated in a more complicated way. While you’re studying, 3% plus inflation will be added to the loan. Once you graduate, if you’re earning under £21,000 per year this will go down to just inflation. Anything above £21,000 per year will be subject to interest rises depending on the amount you earn. Check out the website for the Student Loans Company, which has plenty of resources and further reading.
Can It Be Written Off?
Yes – student loans can be written off, but only in particular circumstances. After 30 years (from the April after you graduate), any remaining student loan is wiped off and you don’t have to pay any remaining balance back. This means that if you earn below the payment threshold for this 30 years, then you’ll never have to pay back a penny. If you die, then your remaining balance is written off, and if you become permanently disabled rendering you unable to work, it will also be wiped. This is different to ‘normal’ borrowing, where the amount you owe can only be written off in very exceptional circumstances.
Will I Be Hounded By Debt Collectors?
In short, no – you won’t be asked to make payments on your student loan by anyone and you certainly don’t have to worry about bailiffs or court proceedings if you aren’t earning enough to pay. As the payments you make come straight out of your pay (or are deducted once you fill in your self-assessment forms if you are self-employed), you don’t have a choice in paying what you owe, so no one will chase you up for it. If you have a university loan from 1998 or earlier and you have failed to make a payment in the past, you may find that you are contacted by debt collecting agencies from time to time.
Can I Repay Early?
Yes – you can make payments to the student loan company whenever you like, and there are no penalties for paying it off a little (or even a lot) earlier than expected. However, beware when considering making overpayments. Depending on your overpayment amount, the sheer amount of time it takes for the loan to be paid off may actually exceed the time it takes to be written off. In many cases, it would be within your interest to keep paying the minimum amount, but this does depend on the loan amount and how much you earn/your assets. Therefore it is advisable to check your calculations with the Student Loans Company before making any overpayments.
Are There Alternatives?
If you don’t have the money to pay for your tuition fees upfront, you might want to look into scholarships and bursaries awarded by various corporations and colleges to encourage more people to do certain courses. Engineering, in particular, is a field of study which has a lot of money thrown at it from British manufacturers who are desperate for home-grown talent to move technology further. You can find out about scholarships online, on http://www.scholarship-search.org.uk/ - you may be surprised what is on offer, and often companies who have funded the scholarship will help you to step off on the right foot when it comes to carving a career out for yourself.
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