Student Finance Myth Buster #2
This week we are exploring how the repayment of student loans actually works and looking at it in a slightly different way, by referring to it as ‘education tax’.
The way that you pay back any loan from the Student Loans Company means that you will never need to pay back more than you are capable of paying back. You will begin repayments the April after you graduate and the current threshold to begin repaying loans is £26,575. This means if, at any point, you earn less than this (before tax) you will stop paying your loan back, until you earn over this amount again. The amount you pay back is completely based upon your income, so the repayments will fluctuate depending on how much you earn. You will not pay any contribution to your loan back for the first £26,575 you earn but will pay back 9% of anything over that.
These repayments come out automatically from your payslip before you get your hands on your money, much like your income tax and National Insurance contributions do, so you don’t need to worry about how much you will need to pay month on month. The way in which the amount you pay back fluctuates with your income and is taken out automatically before you receive your money makes your loan repayments much more like a tax than a loan as you won’t ever pay back more than you can afford.
If you think about your loan in this way, it can help to relieve some of the worry that you may have regarding the massive amounts which can build up over your time at university. You will never be put in a position by your loan from the Students Loan Company where you are struggling to live because of repayments, and they won’t be sending bailiffs, in fact under current regulations, your loan will be completely wiped if it is not fully repaid back after 30 years!
This information is not linked to and does not reflect the views of any companies with which Laura Dench or Elliott MacCallum are associated.
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