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Student Loans & Things to Know

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Recent hype over the large increase in tuition fees have brought student loans very brightly into the spotlight. You can hardly read a newspaper that does not include some sort of story relating to this topic.

What this issue must not do is deter the focus or discourage students who are capable of going on to do far greater things in their lives with higher education. 

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So after the decision has been made and you decide to proceed down this route, the paramount question will ultimately turn toward the best way in which to pay back the loan. Is it correct to repay the amount loaned as soon as possible to keep the overall expense of the loan down?

The answer will depend on each individual’s circumstances, but it is certainly worth looking into more thoroughly.

If you’re a student from a household bringing in an income of no more than £42,611 per annum, you are eligible to receive a higher loan amount by applying for a maintenance grant.

If the annual household income is below £25,000, a student is also eligible for the National Scholarship programme which may be of use. However, this will cease to operate next year.

Previous to 2012 any loan borrowed by a student would expire at the end of twenty five years. It has since been extended to thirty years, but most of the other rules are still the same. 

Therefore, even if there is still an amount outstanding at the end of the term, there is no cause to worry as the debt is then wiped away. This may come as a relief to many who may be concerned about signing up to a debt that could be hanging over them for the rest of their life.

There are no guarantees that the government will not change the term again at some time in the future though, but no doubt it will not be so easy as it would be greatly contested.

If a former student moves to another country before their student loan is fully repaid, then nothing changes – the same rules apply. Should you go away for either a major period of time or permanently, get in touch with the Student Loans Company. They will ask you to complete an Overseas Income Assessment form.

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If you took out a student loan whilst at university or college since September 1998 you will have an Income Contingent Loan.

The interest rate to be repaid is either the current rate of inflation or the current Bank of England base rate plus one per cent – whichever is the lower.

The rates start each year on 1 September 2014 and this year’s current figures are based upon BOE base rate currently at 0.5 per cent plus one per cent totalling 1.5 per cent.

The rules appertaining to how much you are allowed to earn before having to begin repaying the loan also changed recently. It is now set at £16,910 per annum. You only need pay back no more than 9 per cent of anything earned above that.

If your salary is below the threshold, but overtime or a bonus takes you over the £1,410 monthly limit, then your wages will be deducted at source. However, you can can still reclaim the difference from the SLC at the end of the tax year if the final figure does not exceed your annual amount allowed.

With all the recent media exposure targeted at short term loans, it helped shift attention towards credit ratings and how student loans may affect any future applications for a credit card, mortgage, or other types of loan. This should not be a concern as student debt does not have any bearing whatsoever on a person’s credit score.

The only reason a lender of of this ilk will take that into consideration on your application is to better assess the affordability risk.

About the author

Peter Davis Peter Davis is a Marketing Analyst at PaydayLoan123 specialising in financial products. Peter writes most of our articles as he stays up to date with the latest information. He enjoys most sports, particularly playing football and watching his favourite football team. Peter really like his food too as we have all witnessed first hand!

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