There are lots of student finance myths out there.
If you are studying or have recently graduated, then it is time to separate fact from fiction when it comes to repaying your loan.
An essential part of many people’s University experience, student finance comes in the form of loans, helping to cover living costs and course fees.
When taking out any type of finance it is important that you understand what you are signing up to and how it will be repaid, so today CashLady looks at 6 debunked student finance myths.
Debunked student finance myths
1. High student debt means you will be saddled with high monthly repayments
When we think of high debts, we often think of high monthly repayments.
The good news about student finance is that repayments are only due once you have graduated and started earning above a certain threshold.
Repayments will increase as your salary increases, however, if your salary dips for any reason then your repayments will go back down again too.
As it currently stands, you will repay 9% of anything that you earn above £25,725.
If you are earning £27,725, you will repay 9% of £2,000, which is £180 over one year. That works out at just £15 a month.
2. You will be paying off your student loan until you die
Sometimes it can feel like you will be paying off your student debt forever, but we have more good news for you.
If your loans are from the government, which tuition fee loans and maintenance loans typically are, then they will be wiped after 30 years.
Rest assured, you won’t be repaying your student loan into your old age.
3. You will start making repayments as soon as you graduate
Graduating and then securing your first job fresh from University can be stressful and financially trying, so imagine having to budget for student loan repayments too.
The great news is that you don’t have to. Student loan repayments are not due until April after graduation, at the earliest.
That means plenty of time to secure your dream graduate job and get on your feet financially.
4. Your student loan will adversely affect your credit score
Your credit score is key to securing the best rates for finance, whether that’s loans, credit cards or a mortgage.
It can affect decisions that lenders make before providing you with a house or even a phone contract.
For this reason, you must pay attention to this score and work to keep your credit file looking healthy.
Typically, large debts do not look good on a credit file, but we are pleased to say that your student loan won’t appear there, and it shouldn’t have any bearing on your credit score either.
5. Moving abroad means that all student debts are cleared
Jetting off for a shiny new job in the sun, unfortunately, does not mean that you will be jetting away from your loan repayments too.
Wherever you live in the world, you are due to make repayments on your student loan if you are earning above the relevant threshold.
The difference between making the repayments in the UK and abroad is that when you are overseas it is up to you to contact Student Finance and set up the repayments, instead of it being done through your employer.
Avoid making the repayments at your peril. When you return to the UK you will be obliged to repay your missed payments, sometimes all at once.
6. Student loan debt will affect your ability to get a mortgage
If you are thinking about applying for a mortgage, then you may be worried that your student loan will look bad to potential lenders.
You needn’t worry because as we explained earlier, your student loan doesn’t appear on your credit file.
It will, however, play a role, during the ‘affordability check.’ This is where your mortgage lender calculates all of your monthly outgoings to confirm that you will have enough money left over to cover your mortgage payments.
Your monthly student finance repayment will be calculated within this check if you are making regular repayments towards your loan.