Does my student loan affect my credit rating?

It’s always been a huge bugbear of mine that we allow our young people in the UK to get into debt so easily when pursuing and developing their education. It became a culture and the “norm” over the last 10 years to rack up a huge debt when moving through education. My generation almost saw it as an entitlement to get a student loan whether it was necessarily required or not as a rite of passage when engaging in further education.

Depending on the success of that education and the employment individuals went into afterwards, many parents and students have questions about student loan repayments and student loan finance. I’ve tried to answer a few of these questions below.

Does my student loan affect my credit rating?

Your student loan will not affect your credit rating or show up on any credit scoring files at all. for those worrying about this message just using the larger free credit scoring searches to check your credit files such as Experian, Equifax (free for 30 days) and ClearScore (free for life). Some of these credit check services might offer cashback via companies like Quidco or TopCashback so it’s worth checking when searching for your credit score. When you apply for a mortgage or a finance contract your loan payments may be taken into account if they will have an impact on your ability to make payments.

Does my student loan affect my mortgage?

As mentioned earlier student loans do not appear on your credit file. They do come into play when considering your affordability and eligibility for a loan or finance product. therefore when you’re applying for a mortgage and carrying out an affordability check your loan repayments may be taken into account. This is a good thing, as knowing what you can afford before you enter into a financial agreement is essential. It’s much better to enter into a financial agreement with clarity and understanding of your outgoings.

Does my student loan affect my Universal Credit and does my student loan count as an income?

In general, no student loan will be treated as an income for the purposes of universal credit. However, if you’re uncertain there are places you can look that extra information. You can read more about the way loans affect student benefits and credits on the Turn2Us website.

How to contact the Student Loans Company?

General repayment enquiries

Do student loans get written off?

You will only need to pay back your student loan if you earn over the earnings threshold in a tax year. This being said, most workplaces will send monthly PAYE payments into your bank account so the £25,725 threshold for repayments is often understood seen as just over £500 per week or £2,143 a month. Additional bonuses and allowances may have an effect on if you pay more.

In my experience, it can also be tricky to keep on track when your hours and payments go up and down.  Make sure you keep in contact with the student loan company as much as possible when your circumstances change. it’s also important to stick to your guns. I finished paying off my loan during my employment and I had to repeatedly inform the Student Loans Company that they should no longer be taking payments. Make sure you know what you owe and chase them up regularly to keep things on track.

should you have any issues you can also make complaints by the resolver website. That being said, if you do accidentally overpay, you should eventually get any money overpaid refunded back to you.

You will have the debt written off if 30 years have passed since the April after your graduation. If you never happen to gain employment which pays over the threshold you’ll not need to worry about paying back the debt anyway.

Should I pay off my student loan earlier using overpayments?

You can make overpayments, known as early repayments, but be wary of charges occasionally. ultimately the interest rate on a student loan is low compared to most other debts and always will be. Therefore if you have other costs in your life that you need to keep down place your money into those first. In the past students have been known to actually place their loan into high-interest accounts if not needed. This allowed the debt to actually become a credit building facility to make additional funds.

For those borrowing for tuition costs and living allowances an amount totalling around £50k, you’ll need to be on a starting salary of at least £55k and maintain this to even stand a chance of having to pay back the total borrowed before it’s written off after 30 years. Those you earn £15-21k will pay back either nothing or a minuscule amount so in some ways if their degree from the institution doesn’t land you that dream income you’ll be protected from having to pay back the debt; this is a crude simplification, but true for most.

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