Paying off your student loan is a scary, bewildering, depressing and often drawn-out process. So, we spoke to Kevin O’Connor, the Head of Repayments at the Student Loan Company to sort the fact from the fiction…
If you live outside of the UK for a number of years, does it wipe out your loan?
The simple answer to that is no.
Prior to moving abroad you are meant to contact the Student Loans Company and tell them what you’re likely to be doing and if you’ll be working overseas or not. Either way, you’ve got to give some kind of evidence of what your income will be and from that income we will set up a scheduled payment.
It’s a manual payment, so you have to pay it to us from a bank account, through the website or over the phone. If you fail to make those payments, we will chase that as an arrears account. If you fail to contact us, and don’t give us the information to set up a payment scheme, then we’ll set a default schedule, which will be much, much higher – approximately double the average income for the country that you’re in.
If you’re declared bankrupt, will that wipe out your student loan?
If you were declared bankrupt prior to 2004, and you took out any loans before 2004, then it’ll clear those. But the law changed in 2004, so student loans were not part of any bankruptcy arrangements. So, for your members, it probably won’t.
If you work in the state sector for a number of years, will that wipe out your student loan?
No. Even people who work for the Student Loans Company have to pay theirs back.
Will any outstanding money owed get wiped out after 30 years?
If you’re applying for a loan now, the write-off time is 30 years. If you got your loan before 2012, then the write-off time is 25 years. Apart from in Scotland, where it is 35 years.
If you never earn above a certain amount do you not have to pay off your student loan?
The threshold at the moment is £15,795 but it will rise with inflation. If you’ve taken out a new loan, from 2012 onwards, then the threshold is £21,000. So, in effect, there are two thresholds according to when you took out the loan.
But, if your salary never rises above either £15,795 or £21,000 pa, according to what year to took your loan out, then you’d never have to pay back your loan and it would be written off after either 25 or 30 years.
What’s the interest rate on a student loan and when do you start getting charged?
You start getting charged interest from when you take the loan out. From the moment you sign that declaration and the money goes in your bank account, you start accruing interest. The interest rate is a little bit more complicated. It’s probably best to check the site.
Can you pay your loan off through Direct Debit, rather than through PAYE?
Yes. As you approach the end of your repayment term, we will give you the option to change the way you make your repayments. Rather than having an amount deducted from your salary each pay period, you will be able to make your student loan repayments by monthly Direct Debit..
How long, on average, does it take someone to pay off their loan?
That is a very difficult question. There are so many variables, especially whether you’re pre-2012 borrower or a post-2012 borrower. That’ll affect the size of your loan, your repayment threshold [and] your rate of interest. If your course started in 2012 you can use our repayments calculator to estimate a repayment term for your loan.
What’s your best piece of advice for someone who is trying to pay off their loan?
If your circumstances change – if you move job, move house, move to another country, go freelance – they just stay in touch with the Student Loans Company.
There are lots of useful websites with information on paying off your student loan out there. Here are some to start off with:
Information on pre-2012 loans.
Information on post-2012 loans.
Money Saving Expert
Should I pay off my student loan?
A fantastically useful article on the changes to student loans after 2012.
The Student Loans Company
Read their frequently asked questions.
For full information on how to actually pay off your loan can be found on their repayment site.
Would you like to pay off a £9,000 chunk of your student loan? Then apply now for the IdeasTap Uni Fee Fund!
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