Student Loan Debt and does it ever finish?

Student Loan Debt and does it ever finish?

Student Loan Debt and does it ever end?

“The struggle you’re in today is developing the strength you need for tomorrow” - Suku Sandhu

Between 2019-20, approximately more than 2.53 million students enrolled in higher education courses in the UK. University is a decision that most may not take lightly, as doing so can result in decades of paying back student loan debt. Something which may put some off going to university for fear of being in debt for the rest of their lives. Others may first choose to enter the workforce to decide what course they want to do before investing in university. But for some, it feels like the next step after completing secondary education or college. So, what happens when you decide to take that next step.

We have compiled a list of FAQs that usually comes in mind while thinking of a student loan for higher studies.

When am I expected to pay back my student loan?

The amount of student loans you are expected to pay back is based on your income rather than what you have borrowed. After graduating, you will start repaying your loan when you find a job, which is above the threshold. The threshold in the UK at present is £27,295 a year, £2,274 a month, or £524 a week.

How are student loans paid back?

Student loan repayments are paid back to the student loan company; most of the time, repayments of student loans are calculated and deducted when you start working and earning above a certain amount by your employer; however, those who are self-employed will be solely responsible for resolving this in their tax return.

Is it possible to make voluntary payments?

Voluntary additional payments are possible on a one-off basis or direct debit. In principle, you would clear debts earlier; however, if you are like most people who will pay the loan back for 30 years, this will not help you in the long term. There are cases, though, where making additional contributions might be beneficial, such as if you receive an inheritance or company bonus, then your student loan debt could decrease, which would mean that you would stop paying 9% over the threshold. These additional payments are only worthwhile if you pay the total amount or if it helps you almost reach the finishing line of paying back your debt. Making an overpayment will not lessen the amount you must pay each month. Any outstanding debt will also require you to pay 9% off anything over the threshold

How could I prevent overpaying student loan?

If you have almost finished paying off your student loan debt, you can set up manual payments to efficiently ensure that you don’t overpay. Although there is a greater possibility of this affecting people on the previous student loan scheme, anyone who was a student before 2012 (Plan 1 student loans).

The student loan company and HMRC process student loan payments; however, repayments will not end automatically even if you have finished paying the amount. Any overpayments are reimbursed, but you should contact SLC in advance to avoid overpayment.

Am I still required to pay my student loan if I move abroad?

The answer is yes; even if you move abroad, you are still expected to pay your student loan back. Student loan repayments for those working abroad is calculated the same as in the UK. You will still be required to pay 9% of everything over the local threshold; this may seem unreasonable because local costs can differ from national ones. If you go abroad to work, you will be expected to notify the student loan company of your current location and earnings.

If you do not notify them of your whereabouts or they have outdated information on their records for you, you could be charged a fixed quantity each month, depending on your country of residence.

Could rules regarding repayments change in the future?

There are no assurances that the current rules will be the same 30 years from now. However, any significant changes are unlikely to impact students already in the system but would most likely affect future students. Keep yourself informed about updates on rule changes by watching the news or calling student finance.

Student loan debt does end after 30 years as you have a 30-year period to pay off the debt, and if you’re not able to pay the total amount, your debt will be written off. For the most part, having student debt will not impact your life negatively like other loans as it is not likely to affect your credit rating, which means it is not expected to affect you if you want to get a mortgage. Moreover, you are only required to pay back student finance once you earn over a certain amount, making taking a student loan less daunting. The decision to go to university is ultimately yours; as long as you are happy and don’t feel forced to give up on your dreams of studying at university because of the financial impact, that’s all that matters. Intellisaving believes in the power of happiness; ultimately, you will never feel truly satisfied if you are not happy.

Hope the points above help you in understanding more effective as how the student loan works in UK. Furthermore, the journey towards student loan saving could effectively start from childhood. All children mostly get some pocket money/token of love from their loved one’s time to time in childhood. If the money can be added to a saving account and small contributions are added eventually, then it will be a significant amount by the time a child is ready for higher education. It’s a lifestyle change, which if taken on time could help ease the huge burden of student loan in future.

Intellisaving can help you to track all your saving goals and saving accounts. It’s the best app for finance management as you are given strategic control of your savings and interest-bearing accounts on one single platform, “Intellisaving!”, this smart saving account application will provide you with access to the best rates in the saving market across each saving category, such as a regular saving account. Plus, you have a detailed portfolio of your saving and interest-bearing accounts profile; this app ensures that the tracking of savings and interest-bearing accounts are easier than ever before.