The ‘debt for life’ label attributed to student loans for tuition fees and living costs label is seriously affecting the amount of new applications for higher education in the UK. The idea of debt hanging over our heads with no jobs around to pay back the debt is a big deterrent for many who would like to improve their prospects by increasing their employability. This is affecting the future of the UK economy because without educated leaders and innovators from academia, the UK will fall behind the rest of the world in terms of development because we are not cultivating an entrepreneurial spirit.
Debts Don’t Matter
Many people do not realise the debts accumulated as a student, are not the same as debts we accumulate in our everyday lives because there is no obligation to repay them in the same say. Student loans need repaying, but only if you earn over £21,000 per year (those were the levels in 2012) and if you never make it to the point where you do earn enough, the debts are written off. If the debt remains unpaid after thirty years, they magically drop off the radar and you will no longer need to repay them. Does this mean you should never repay them? Well, student loan repayment is moral dilemma we all face, but in reality, if an education has provided the tools to live comfortably, then it’s doubtful you would not repay the loans. In a sense, this is a ‘No Win, No Fee’ situation for students.
Will Repayments Hurt My Income
The truth is student loan repayments will hardly affect your income at all. You only pay around 9% of your income towards the tuition fee, but that 9% only affects earnings above the 21,000 threshold. So, if you earn £21,100 in a year, you actually only repay £9; earn £22,000 and you’ll repay £90. Those figures do not worry many people because you really could spend more on a night out and not bat an eyelid.
Debt Collection Agencies
Student loans have no debt collection recourse because they are collected through payroll in the same manner as income tax and national insurance. If you are self-employed, you need to work out your payments when you come to file your self-assessment and failure to do so can land you in court in a similar way to failure to pay taxes would land you in hot water with HMRC.
What about Rising Fees
The thing to remember is that although fees rise, repayment levels are the same. You will only repay £9 in every £100 over the £21,000 threshold until the fees are paid off and the ‘no win, no fee’ scenario is definitely relevant. However, if you choose the most expensive university with the highest fees and you decide to take course after course after course, you could end up repaying the debt for a very long time.
What about Other Debts
This is where most people fall down. As a university student with lots of potential, you will have an army of banks willing to rope you in and lumber you with lots of debts. You will have student overdrafts, credit card debts and loans by the time you finish your course if you do not use your head and budget your income. Most students complain more about struggling with debts granted by their banks than anything else. The best thing to do is work while you study and minimise the amount of credit you take accept or apply for because banks can and will use any means of recovering debts at their means.
Katie Latchford is a writer who mounted considerable debts during her years of study at University. She often blogs about her financial situation and encourages people to seek help with debt as early as possible.