What Happens If I Don’t Pay Back My Student Loan

Going to university in the UK is an expensive proposition these days and begs the question of whether it’s really worth it. In the UK today, it will likely cost you £9,250 per year in University fees, another £5,200 per year for accommodation and realistically the same again for food, books and some form of entertainment. For a three year course, you’re looking at a grand total of £58,950 in student debt. 

Watch Out

It’s natural to feel scared when you see bold headlines about student debt and how it’s on the rise. In 2017, loans for living costs increased, scaring the students and parents in the process. With prices having increased further over the last four years, students and parents are highly concerned about how they will pay off this debt or face a life of loans.

The honest answer is your concern is irrelevant. Student’s need to focus on their career and career earnings. It’s your earnings after university that determine how much you will need to repay. If your earnings are substantial, you’ll pay the loan off. If not, you won’t, and your loan will be written off.

No Cash Required

Money isn’t an issue when it comes to university admission. You don’t need to pay upfront to start your course. As soon as your application is approved, the student loan company will handle your tuition expenses.

You can also take a loan for your living expenses, and you won’t need to pay any repayments before graduation. It’s only once you’re in full-time work that you need to repay the loan after graduation. 

Also, remember, taking a student loan isn’t mandatory. You can pay for your tuition by working during your studies.      

30 Years

After 30 years of your graduation, your student loan automatically gets cleared. It doesn’t matter if you paid the full amount or not, you owe nothing to the student loan company. 

Graduates with large salaries will probably repay the full amount during this time, but others on smaller salaries are likely to not pay their full student loan. If your income doesn’t reach the threshold, you pay nothing.

The Earnings Threshold

To be required to pay back your student loan, graduates need to earn over the threshold amount. The threshold amount for the (2021/22) tax year is £27,295, which means earners under the threshold never pay a single pound. 

Moreover, if you never earn more than £27,295, you’ll never have to pay back any of your student loans. In reality, most students will likely pay a part of their student loan within 30 years, but not the entire thing. 

Debt Collectors

Most of us feel discouraged to borrow money, fearing debt collectors, if you cannot pay it back. Student loan works slightly differently because your company subtracts directly from your salary your loan repayments from your paycheck. Thus, there is no need for debt collectors. 

Student Loans for Part-Timers

Before 2012, part-time students could not apply for student loans. Now they can, but their course intensity has to be 25% or more. If you are a part-time student, you can get from £4,500 to £6,935 as their tuition fees for the 2021/22 tax year. 

As for the rest, the borrowing procedure is the same as full-time students. You can get maintenance loans if your course begins on 1 August 2018 or after.  


The impact of student loans on getting a mortgage isn’t significant, and as such, you shouldn’t worry about not getting a mortgage because you have a student loan to repay.

Loan repayments will, however, affect your affordability check. Under the affordability check, mortgage lenders will calculate how much they can lend you based on what you can afford to pay monthly. Deducting loan repayments decreases what you’re going to be paid each month and, in turn, what’s left to pay your mortgage. 

Postgraduates Can Get Student Loans

The government has started giving loans to postgraduate students in 2016. You can get the maximum amount of £10,906 to complete a master’s degree. Although getting a master’s degree in the UK might cost you £9,000 – £11,000. And the given amount is the combination of your tuition fees and living expenses. This might be enough to cover your tuition but not your living expense. 

Ph.D. students are also receiving loans from the government since 2018. They are offering around £25,700 to complete all the courses. 

Credit History

When you apply for a mortgage or loan from a bank, they will assess your eligibility to pay them back. For this, they usually look into your application, credit files, and any prior engagement you had with the bank.

Your credit history has all your previous credit relations and financial dealings records. However, your credit history does not have a record of your student loans. As such, there is no way for a bank to know if you have student loans unless they request related information in the application form.   

Above-Inflation Impact On Interest Percentage

Students usually find it challenging to comprehend how interest rate works. So, most of them end up accusing the government of setting unfair interest rates on their student loans. 

In reality, this is not true. By law, the government can’t charge more than a 3% interest rate based on the Retail Price Index (RPI) on student loans. If the interest you are charged increases, it’s because the RPI has increased and thus, you see a rise in student loans interest.

The Bottom Line

Student loans provide financial backing for those students who want to receive higher education yet cannot because of money. The student loans company usually don’t ask for your credit history. Thus, even with a bad credit record, you can get student loans. Moreover, the interest rate is quite low, which makes it easier for you to go to university and build your career over the long term.


TheRetirementBlog.co.uk is written by David Jacobs who is on a quest to retire early and get out of the rat race. David is a financial expert who lives for early retirement. Follow his journey making money, saving and investing to retire early and get the best out of his retirement.

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