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Student Finance Myths

We know that choosing to go to university is one of the biggest financial commitments you'll ever make. With most tuition fees for undergraduate degrees standing at over £9,000 per year, it may seem like getting a degree from a university isn't worth the debt. We've put this page together to help debunk some common myths about student finance.

Cost of degree vs what you'll actually pay

With the rise of tuition fees in 2012, the media has been focusing heavily on the amount of debt students will leave university with. There’s no denying that with tuition fees and maintenance loans, going to University is expensive. However, it’s key to point out that very few students actually ever pay back the full cost of their degree, and you won’t be asked to pay it back in one lump sum.

If you receive tuition fee and maintenance loans from the Student Loans Company whilst you are at university, then you won’t be expected to start paying anything back until you have left university and you are earning over £25,000 in England, or £27,295 in Wales. In NI repayments start once you are earning over £22,015 per year, and in Scotland £25,375

Once you are earning enough, the Student Loans Company will take out monthly repayments from your wages. The amount you pay each month depends on how much you earn – the more you earn, the more you pay back each month. Find out more about monthly repayments on our tuition fees and loans page.

It’s also important to remember that your student loan debt is wiped after 40 years in England and Wales, 25 years in NI and 35 years in Scotland whether you have paid any of it back or not.

Cash vs loans

It’s a common misconception that if you don’t have the cash in your account when you’re applying for university, then you can’t go. Most students will apply for a tuition fee loan and a maintenance loan from the Student Loans Company. SLC pay tuition fees directly to the University, and loans are paid into your account usually in three blocks each year of study.

If you don’t have the cost of your degree in your account, you can still apply for and go to university!

Loans and your credit score

You may be worrying that owing such a large amount of money when you graduate will affect your credit score. Student loans are not included on your credit file, so will not affect your credit score.

Mortgage providers may ask on a form whether you have had a student loan, but it is typically just for information and to check that you can afford to pay mortgage repayments as well as your student loan repayments.

Paying upfront vs taking out a student loan

Some students (or their parents) decide that to avoid leaving University with a lot of debt, they’ll take out a bank loan to pay fees and living costs upfront. For most, this is a bad idea, as bank loans charge a much higher interest rate and must be paid back within a certain time frame, whereas a student loan doesn’t have to be paid back until you graduate and are earning over £25,000, and the debt gets wiped off after 40 years regardless of how much you have paid, this applies only to students from England. In NI, you start repaying once you are earning over £22,015 per year, and in Scotland £25,375 Loans are written off after 25 years in NI and after 30 years in Scotland, in Wales you start repaying after you are earning £27,295 and it is written off after 30 years

Loans/graduate contribution

Most people are put off by the word loan. The way student loans actually work though, it’s best to think of your loan more as a “graduate contribution” once you leave university.

Yes, you have loaned money, and yes, you have to pay it back – but crucially:

  • It's repaid through the income tax system so taken directly from your wages before you are paid
  • The amount repaid increases with earnings
  • It doesn’t go on your credit file
  • Debt collectors won’t chase for it
  • Bigger borrowing doesn't increase repayments
  • Many people will continue to repay for the majority of their working life

We hope these notes have helped you get a better understanding of student finance. If you have any questions, contact our Student Finance Team:

* Points taken from Martin Lewis article on student loans.