Student Finance Myths
5th January 2017
I left school to go to university in 2010, this was before the big rise in tuition fees for University. Below I’ll be talking about what affects students of today, but there are lessons to be learned from my oversights.
As those who have seen me talk will know, I didn’t do a huge amount if research before I went and was very fortunate to end up at a fantastic university on a great course and have no regrets. Due to my lack of research I have found myself learning many university related lessons the hard way; namely, student finance.
I often see my friends from university and it appears we all hold/held common misconceptions that I still hear to this day from current students...
1. Students loans are interest free – Incorrect!
Almost all of my friends and myself, thought student loans were interest free when we went to university.
People often talk about student finance loans as not being “real loans”. Whenever someone gives you money and expects it back, it’s a loan. The main benefit of a student loan is you will not have bailiffs knocking at your door if you’re not paying it as it’s managed through your work pay-slips and it gets written off after 30 years (that part is true).
The money is taken out of your pay-slip each month once you earn over £21,000, you won’t have to make payments yourself; I just treat it in a similar way to Tax and National Insurance.
However, your total loan CAN rise; students who went to University after 2012 now pay RPI (Retail Price Index) + 3% interest per year. In real terms, this translates to 4.6% for 2016/17. This means if your loan totals £40,000 it would be increasing by £1840 a year (£155 a month), before any payments are made back in.
You can see below the repayments made dependent upon your income, this may lead to you not even repaying the interest each month.
Source: Money Advice Service, 2017
Don’t worry however, as the loan is not quite “normal” any amount remaining will be written off after 30 years, meaning you make no more payments and do not owe anything!
Whatever you do, do not let yourself be put off or dissuaded by anyone from going to university because of “student debt”. It’s not a payday loan with interest rates of 3456% nor will it affect your credit rating – it’s a fantastic way to allow the government to cover your costs to continue your education.
If you’re really concerned about it, take a look at degree level or degree apprenticeships where employers will pay for your degree and pay you to learn – I wish I’d known about this!
2. You don’t have to pay it back if you work abroad – Incorrect!
This is a big misconception. 'If you move away for 5 years it gets written off...' is something I hear a lot and not sure if I ever believed, but always liked the idea of. This is also a big myth, your loan is a contract and therefore enforceable. A friend of mine works in Dubai as a teacher and has found himself having to fill out the “Overseas Income Assessment Form” for the student loans company (SLC) and having to set up a direct debit from his bank account – meaning it isn’t coming out of his pay-slip.
“I’d always believed that you didn’t have to pay your student loan if you moved abroad, as did most people around me!” S. Drinkwater, Dubai
This is something to bear in mind when working out if a move abroad is for you. Here’s a really handy chart showing what you’ll need to pay back depending on which country you work in.
3. Maintenance loan will cover all your rent and living costs – Incorrect (In Most cases)
This one stung me, BIG time.
I chose the nicest accommodation my university had to offer, assuming my maintenance loan would cover the rent and I’d have to work to pay for food etc – big mistake!
It’s important to remember that your maintenance loan is based on your parent’s income, the less they earn the more you get. This is especially helpful if your parents would not be able to support you, but even if they can, it doesn’t mean they will. My parents did not support me through university so my family’s income was kind of irrelevant at this point. I worked 15-20 hours a week on top of my study to cover all of my costs and have some money to play with. This was great, I met loads of people and gained valuable work experience and qualifications but meant I had to sacrifice quite a few events and outings with friends due to lack of funds.
Do some sums before you choose your accommodation and be sure to set a budget for weekly spending, you may have to swop your Dolmio sauces for Tesco Value. Even if your parents are planning on supporting you, or your maintenance loan is at the highest, you can never be too careful when it comes to money.
These are 3 big misconceptions I held when going to university, with a tiny of bit extra research I would have known this from the start and been able to plan accordingly for a far easier life. As I said at the start, I have no regrets from univeristy, if it’s right for you then do it but perhaps now you’ll have a little bit more knowledge of how the finances of it all works. For more information make sure you have a look at the government website.
Unifrog Area Manager
Unifrog Insights monthly email
Progression-related teaching materials, and insight from the Unifrog platform, emailed to you once a month.