University costs have been a worry for students and parents for a long time, but with the changes over the last few years it has never been more expensive to get a degree. Newspaper headlines tell stories of students that will be leaving university with more than £50,000 of debt, especially if they wish to pursue a career in a subject such as medicine or law.
As of 2012, all universities are allowed to charge up to £6,000 a year, with many choosing to charge up to £9,000, which they are allowed to do if they are willing to make extra provisions for bursaries for the poorer students. This amount is almost treble the maximum figure that could be charged in 2011. The increase in tuition fees does mean that students will be in more debt, but it isn’t a case of ‘pay up or don’t go’, as Student Loan Companies are there to cover the costs.
Student loans aren’t like any other type of debt; they are repaid just like income tax, meaning that if you stop working the repayments stop too. There’s no debt collectors to chase you and after 30 years all remaining debt is wiped. Whether you borrow £6,000 a year or £9,000 a year, there’s no difference in monthly repayments, it depends on how much you earn rather than how much you borrowed, so if you want to go to a more expensive university you won’t be worse off for it in the long run.
Repayments only start after you are earning above the threshold, which is £21,000 a year. You only have to repay 9% of everything you earn above £21,000 of pre-tax salary. If you take a pay cut, lose your job or have a break from working, your repayments will change accordingly. This might sound confusing, but it means that if you earn £22,000 a year, you are £1,000 above the threshold, so you pay 9% of £1000. Your yearly repayments will cost you £90, which comes out before you get your wages. Think of it as more of a graduate tax than a debt.
If you earn £40,000, you are £19,000 over the threshold, so your annual repayment will be £1,710. It is all dependant on earnings, meaning if you earn under £21,000 a year, you will not have to pay a penny until your wage increases.
Student loans don’t go on credit files and they will not affect your ability to get a mortgage in the future. If you want, you can repay early, but it’s important to remember that a lot of students will not ever pay it all back. Only those who are high earners will repay the full amount.
If you come out of university and manage to get a great, well paid job straight away, you could repay your student loan very quickly. However if you get a job that is only just over the threshold, you will be paying very little each year, but overall you will be paying for up to 30 years and will likely pay more than those who could afford to pay off their student loans quickly because of the interest that goes on top of it.
With no penalty for not paying the money back, no impact on credit scores and very small repayments, the amount of debt you’ll get into at university definitely shouldn’t put you off going, especially if you dream of a career that requires higher education. Medipathways offer a fantastic bursary system to help students cover the costs of studying, which you can read about here.