Let’s bust some of the most common preconceptions about student loans. You’ll be surprised how much of what you believed to be true is actually just a big myth!
So, here we go:
You have to pay back as soon as you can. False!
You don’t start paying back your debt when you get to uni, or straight after you graduate unless you earn more than a certain sum a year (currently the threshold is £21,000). Each month you’ll be paying 9% of what you earn above this sum. However, if you want you can start paying it back earlier; you decide on a sum that’s convenient for you, there is no minimum or maximum sum and you’ll never have to pay all at once.
You are in charge of paying the loan to the right people. False!
When you start paying your student loan your debt will be taken off from your pay automatically, just as tax is. When you start working and you’re earning above the threshold, the right sum will be taken off your pay. This makes things easier for you and as you won’t even have the money in your hands, so you cannot spend all your salary before paying for the loan!
You pay back a lot of money every month. False!
The minimum you can pay is only 9% of you wage, above the threshold. For example if you’re earning £25,000 a year, you’ll pay back roughly £30 a month, that’s less than £10 a week! From that point of view, the loan can motivate you to earn more: the more you earn, the faster you’ll pay it back. If you start making less, your payment towards the student loan will stop and if you don’t ever earn above the threshold, you don’t ever have to pay anything back!
Having a student loan impacts your credit files. False!
A student loan has no impact whatsoever on your credit history as it’s not included on credit files and doesn’t show up on credit checks.
Any changes to the system will affect my loan. False!
Any changes due will generally not affect your personal loan. Changes will not affect the terms of your personal loan, but it is important to take into account that the government can change rules from the past.
You’ll have to pay this loan until the end of times. False!
The remaining balance of your loan will be written off 30 years from the date when your yearly wage first meets the threshold – currently £21,000 a year.
If I can’t pay it back, my parents will! False!
The student loan is the sole responsibility of the student who took it. If you’re not earning more than the specific threshold you’ll simply not pay back your student loan. Your guardians, parents or any member of your family cannot be forced to pay for your student loan.
If you’re moving abroad, you won’t have to pay back your student loan. False!
As much as we’d want this to be real, unfortunately it’s not true. Even if you move anywhere else in Europe, US or all the way to China, you have to let the relevant authorities know, as you still have to pay back your student loan. If you won’t ‘they will hunt you down and make you pay’. Seriously now, you might be charged a fee for trying to get rid of your responsibilities, so it’s best to play by the rules!
It’s crucial you pay back your student loan. False!
It is, but you don’t have to make it your long life goal. Stats show that 40% of students never fully pay back their student loans, while wider research states that the actual percentage is 80%. That’s 8 out of 10 students that never pay back their student loan!
10. Grants/bursaries and loans are the same. False!
If you apply for grants or bursaries and you’re successful- you need to see that sum of money as a gift, and what happens with gifts? You get to keep them! Loans are different, you have to pay loans back!
*I’m not a financial expert so this article is written based on my own experience in addition to research. There are many myths around this topic so it’s really important that you do your research and truly understand what a student loan is, before you make the decision of taking it or not .It’s time to do your own homework on it! Start your journey at https://www.gov.uk/browse/education/student-finance