Graduate Debt Explained: How Do Loans Work After Uni?

24 September, 2015
Charlie Hooper

Graduate Debt Explained: How Do Loans Work After Uni?

24 September, 2015

Student loans have a complicated history, having undergone a great many changes over the past few decades. Recent grads may soon start paying them off, but very few seem to truly understand the student loan system, or how the repayments work. If you’re looking for jobs and considering moving to London, you need to know what’s what.

It’s not just students who’re confused by the system. The Student Loans Company itself has been accused of poor efficiency, and MPs have said that the government can’t work out how much students owe them.

The whole thing is pretty messy, so we’ve compiled a little cheat sheet for what you need to know.

A Brief and Recent History:

Since 2012, students have been able to borrow up to £9,000 to cover tuition and £7,751 in maintenance costs (going up to a £8,009 maintenance loan from this year). These are available to most students, with maintenance grants also available (though probably not for long).

When Do You Pay It Back?

Repayment is dependent upon salary (and obviously doesn’t apply to grants and bursaries). Repayments start when you begin earning over £21,000 a year (that’s for people who started on or after September 2012. If you started before, the threshold is £17,335). You stop paying if your income drops below this amount.

How Much Is It?

For every pound you earn over that amount, 9% goes towards paying off your loan. This is the responsibility of the student loan company and is all designed so that there’s minimal hassle or impact. At least, that’s the theory, and it’s definitely not the case if you’re self-employed.

What About Interest?

As well as meaning you pay back more, a higher salary means a higher interest rate. The more you earn, the more interest is added. Interest starts (for those earning less than £21,000) at the same as the Retail Price Index (which measures changes to UK living costs). As you earn more, interest rises and is added to the RPI of 0.9% on a sliding scale) up to RPI+3% where income is £41,000 or more.

Students who started after 1st September 2012 are charged interest at RPI+3% whilst studying and until they begin repayment.

This means that if someone borrows the full 50k and has a salary of 30k, they’d make repayments for 40 years.

Except, not quite!

The good news is that 30 years after graduating, your debt is wiped out.

Oh, and you can’t dodge it by moving abroad. That’s a myth.



Did you know if you refer a friend for a job through Instant Impact you could bag yourself £100? Could go some way to pay off that student debt...

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