In 1998, student financing arrived in the UK. However, it underwent massive changes in 2012, and even years after that. Since then, many myths concerning loans for students UK have been surfacing in the money borrowing market.
Some of them include higher fees equals higher repayments post-graduation, lifelong debt creation; debt can get avoided with migration, etc. Unfortunately, students should know that all of them are merely myths and avoid such information.
Moreover, students shouldn’t get worried about money borrowing through loans, credit cards, etc. The reality of student financing is different from the proclaimed market myths.
5 Myths of Student Financing in the UK
● Higher Tuition Fees Leads to Higher Repayments Post Graduation
Many students think that the cost of repayment becomes higher due to the increased tuition fees. However, they should know that universities have a tuition fee threshold of £9,250 per year.
Moreover, students get charged post-graduation month, i.e., April. They are required to pay nine percent of any salary amount above £26,525. However, another source suggests that the threshold is £25,000.
Also, the repayment consists of living costs and tuition fees of a student. Therefore, the student’s repayment gets estimated based on earning, interest rate, tuition fees, and living costs.
● Student Financing Equals Lifelong Debt
Whether students take money from a direct lender or through a student loan company, the doubt of lifelong debt remains. According to a source, many UK students have an average debt of £50,000.
Students shouldn’t worry about the repayment amount and think it would cost a lifetime to pay off. Instead, they should find more means to generate higher income, savings, investments, etc.
Moreover, as per the current structure, the student debt can get paid off in thirty years. According to Money Saving Expert, a graduate requires a £45,000 per year salary to relieve debt.
● Debt Can Get Avoided with Migration
Students should know that they can’t avoid debt by migrating to a foreign country. Most student loan providing companies require students to inform their migration, especially for more than three months.
It allows the companies to determine the repayment based on the living costs and salary. Additionally, the repayment structure differs from UK organizations. Moreover, most Scottish residents can relish free tuition fees; however, it isn’t correct when relocating to the land.
The tuition fees aren’t free for people belonging to other areas but residing in Scottish regions. However, a three-year residency in Scotland can provide the benefit of free tuition fees. Additionally, other countries might not offer student financing.
Therefore, a person would require to break savings or work part-time to recover tuition fees and other living expenses.
● No Tuition Fees in Scottish University
Students often tend to apply to Scottish University for waiving off the tuition fees. However, free tuition fees only apply to EU countries and Scotland citizens. However, students from other countries would be required to pay the tuition fees depending on their place of origin.
Moreover, university fees differ in each country. For example, Whales has a cap of £4,000; however, Northern Ireland has less than it. However, the lower amount applies to students studying the latter region.
Similarly, England adheres to full tuition fees and becomes one of the most expensive places to study in the UK. However, students should know that they start making repayments a year later post-graduation.
Therefore, the first repayment for a student who graduated in June 2019 would begin by April 2020. Additionally, it applies to students with a minimum yearly salary of £26,525. The repayment schedule remains the same for dropout students.
● Student Financing Can Affect Future Mortgages
Money borrowing becomes more problematic for students planning to mortgage post-graduation. However, it only plays a minor role in the mortgage application approval or disapproval as the lenders can view financial statements.
It provides lenders with information about an ongoing invisible recurring repayment. However, post-graduation the students have a year to accommodate wealth without making any repayments. Therefore, it would offer the ideal time to purchase a home mortgage.
However, graduates must account for the recurring mortgage costs and student loan repayment costs before submitting their application. Defaults or missing repayments could lead to second mortgages or loss of property.
Additionally, lenders would provide smaller repayments after evaluating through the affordability check. Also, nine percent above £26,525 for a student loan would provide a negligible amount, which wouldn’t affect the mortgage.
● Other Myths
A few other myths include student debts affect credit rating; the government interest rates fluctuate, bailiffs would collect if payments get missed, etc. Besides this, there is also a myth that all universities can raise tuition fees; UK students have the worst world debt, etc.
Students should also avoid myths like high earnings equals high repayments; loan processing takes ages, unavailable information on student loans, etc. Student Finance England or SFE provides complete guidance on student loans.
Furthermore, the government only charges the RPI and a three percent interest rate to students. However, the RPI fluctuates due to inflation, and therefore, students think that the APR fluctuates continuously.
Lastly, students aren’t required to repay post-graduation. As mentioned before, their first repayment would occur almost a year later.