How do I manage my student debts?
In 2011 universities got the go ahead to increase tuition fees to a maximum of £9,000 per academic year. This provoked widespread anger amongst many, especially as Nick Clegg and the Liberal Democrats promised to phase out tuition fees altogether.
Increasing tuition fees has had a huge knock on effect as the average student debt level is expected to rise to £53,000, according to the BBC for students starting in 2012. This is more than double the average expected level of £26,000 for students that started in 2011. UCAS figures released in January showed that the total number of applicants (including overseas students) was 8.7% lower than the previous year. The number of school leavers decreased by 3.6% and the number of UK students was 7.4% lower than last year.
If the figures of £53,000 are to be believed – £27,000 will be made up of tuition fees with £9,000 for each academic year and the further £26,000 consist of debt incurred through living expenses and academic equipment. Many students starting this year will receive a loan that will cover a certain amount of expenses incurred whilst being at university. However, anything after this will need to be funded alternatively and this can usually be through credit – such as credit cards, overdrafts or loans. So how do you manage your student debts?
Your student loan will only need to be paid back once you are earning. Direct Gov explains that for students that started prior to 2012 then you must earn more than £15,795 before you start to make payments, and your repayments won’t start until the April following the completion of your course.
For students starting after 1st September 2012 you must earn more than £21,000 before your repayments start. Your repayments into your student loan will be 9% of anything earned over £15,795 or £21,000 respectively, as detailed on the Direct Gov website. The payments will come straight out of your wages. Other than this you do not need to do anything with your student loan as your payments will automatically stop once you have repaid your loan in full. With any other debts such as overdrafts, credit cards or loans these are classed as unsecured creditors and you will be required to pay these back yourself.
With a loan, the monthly repayments are generally explained to you when taking it out. Credit cards require a minimum payment to be made each month and this is usually 5% of the balance, although overpayments can be made. In order to repay your debts at a rate that you can afford you should put together your income and expenditure to determine how much you have left over to pay your creditors. If you are able to repay the contractual payments, then you can continue to do this until your debts have been cleared. If you are in financial difficulty and are unable to meet the minimum repayments then you may want to contact Payplan who can assist you in setting up an affordable arrangement for you to repay your debts.