How to Decide Whether to get a Student Loan

If you are thinking about doing a degree then it might be the student loan that could be a factor that is putting you off. This could be because you are concerned about the repayments and having a debt before you even start work. It is worth understanding how the loans work and then this should help you to be able to decide whether they are the right thing for you.

How much can you borrow?

There can sometimes be confusion over how much you can borrow with a student loan. This is because when most parents of teenagers were students (if they were) the system was very different. Ever student is entitled to borrow money to cover four full-time years of higher education study. A degree course will normally last for three years full-time and a masters for an additional year. Other post-graduate study, such as a PhD would not normally be funded. However, there may be exceptions to this within certain industries. There may be bursaries available for certain areas of study across many different professions and that will be something that the university will be able to advise you about.

Assuming that they will have to pay and have not borrowed before, then all students will be entitled to a loan which will cover their course fees. If fees go up, then the loan amount will go up as well. They may also be entitled to borrow money to pay for their living expenses as well. This is means tested though and better off families will not get it. So, it will depend on how much the household income is as to how much is allowed. However, even those students that get the full amount, may find that it will not be enough to cover their rent, bills, books, travel expenses, food and other things. This means that they may need to work part-time to supplement it or rely on their parents to help.

How do you repay?

Many parents and students worry about repayment of the loan. They feel that they do not want to be in debt for a long time and that the repayments will be a big burden. However, the repayments can be fairly straightforward and should be easy to manage. The repayments are means tested and taken out when you get taxed if you are employed or calculated as part of your self-assessment tax return if you are self-employed. The more you earn, the more you have to repay and if you earn nothing or very little then you will not need to make repayments at all. After thirty years, any remaining loan is written off, so you will not necessarily have to repay all of the loan. Most students do not repay it all, which means that they pay no interest and not even all of the balance that they owe back. This makes the repayments affordable.

If you can afford to pay the fees without borrowing then you might think that this will be cheaper for you than borrowing money. However, this will depend on how much you earn after you graduate. If you think that you will be a high earning job for the duration of the next 30 years after you graduate then you will repay the loan in full and also have to pay the interest so it will cost you more than using the money you have, unless you can get a better return on that money than you are paying in interest on the loan, especially if you have bad credit.

Some graduates can afford to repay their loan early and feel that they should do. Again, this is something that they should calculate as it can be tricky to know for sure. It is hard to predict the future and whether you will always be working and there able to repay the whole loan. If you feel you might stop working for a while to look after children or aging parents or that you might lose your job, go back to studying for a while or anything like this then you may not be earning enough over enough years to repay it in full. It is a gamble that you will have to take. As many calculations as you do, it will not allow you to see into the future and so you will have to make a calculated prediction as to which will be better financially. Of course, you may feel that it is your obligation to repay the loan in full as you got an education form it so you should pay for it. Some people feel that they should pay but others feel that if other people are getting it cheaper or free then they are entitled to that as well. It all depends on your way of thinking.