15 Student Finance myths debunked
We hear a lot about Student Loans and interest rate increases in the media. But what does it actually mean? We debunk some of the most common Student Finance myths...
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Student Finance is complicated enough as it is. It really doesn't help when incorrect info is thrown around.
In our National Student Money Survey 2024, we found that 45% of surveyed students didn't fully understand their Student Loan agreement. On top of this, over 70% worried about paying it back.
Arming yourself with the facts when it comes to this stuff is extremely important. For many young people, it can even determine whether they go to uni at all.
And while we don't agree with many aspects of Student Finance, the situation often isn't as bad as it first seems. This guide will help you separate fact from fiction and explain how Student Finance actually works.
15 misconceptions about Student Finance
Here are the most common myths about Student Finance, with key facts and info to clarify them:
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UK student debt is the worst in the world
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This is something we see thrown around a lot in the media, but please don't let this scare you.
Tuition fees in England are some of the highest in the world. However, the way that we pay for university here is different from many other countries (like the US). So, it's not really a fair comparison.
Tuition fees here are high (too high, in our opinion). But, you don't have to pay anything upfront and Student Loans are funded by the government.
As you'll see below, the repayment terms are manageable and won't affect your credit rating.
In contrast, private Student Loan lenders in the US are notoriously unsympathetic to students' personal circumstances. Six months after graduation, they're knocking on your door looking for repayments whether you can afford them or not.
While there are private Student Loan lenders in the UK, consider the alternatives first.
If you pack your bags and head to another country to study, tuition fees might be cheaper. But, you won't get the same level of financial support, which means paying more upfront.
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You need to be wealthy to go to university
While tuition fees are now over £9,000 a year for most UK students, and you'll need to pay for living costs on top of that, you don't need to pay anything upfront. The government will cover your tuition fees with your Tuition Fee Loan. You can also get a Maintenance Loan to cover your living costs.
The lower your household income, the more money you'll receive as a Maintenance Loan. This is because Student Finance understands your parents might not be in a position to financially support you at uni.
This does mean those from lower-income backgrounds graduate with more debt than those from wealthier families (and so will accumulate more interest).
However, Plan 2 repayment terms (for those of you who studied between 2012–2023) mean it's unlikely you'll pay off the loan in full before it's cleared in around 30 years.
Unfortunately, for those with Plan 5 loans, it is more likely you will repay it in full before it's cleared after 40 years. Find out more, including what repayment plan you're on, in our full guide to repaying Student Loans.
It's important to note that many students report the Maintenance Loan they receive isn't enough to cover their living costs at uni.
In fact, 58% of students in our latest National Student Money Survey turned to a part-time job to boost their income.
But luckily, there are loads of ways to make money at uni if you're worried you might be low on funds. And remember that there are loads of student grants to help you.
The repayment system for Student Loans changed for students who started courses after 1 August 2023. Find out more in our article about the Student Loan changes. -
More debt means higher monthly repayments
What many don't know is that, although the increase in tuition fees means you'll graduate with more debt, you'll actually pay back less each month than students did previously. This is because how much you repay each month depends on how much you earn, not how much you owe.
Welsh students who started uni after 2012 and English students who started between 2012 and 2022 currently only repay 9% of anything they earn above £27,295. Note that this is NOT 9% of everything you earn.
For English students who started uni in 2023 or later, the repayment threshold is currently set at £25,000.
Students from Northern Ireland (or English or Welsh students who started uni before 2012) have a threshold of £24,990.
And for students from Scotland, the threshold sits at £31,395.
For example, if you're from Wales and went to uni after 2012 and you're earning £29,295 (so £2,000 above the £27,295 threshold), you'll repay 9% of that £2,000 (£180) over the course of the year. This works out at just £15 a month.
Obviously, if you're lucky enough to get a high-paid job when you leave uni, you'll repay more. If you're earning £36,295 annually and have a Plan 2 loan, you'll pay 9% of £9,000 (the difference between your salary and the £27,295 threshold). This is £810 a year, or £67.50 a month.
Our guide to Student Loan repayment covers everything you need to know.
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You'll be paying off student debt your whole life
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No matter how big your student debts are, if they're government loans (including the Tuition Fee Loan and Maintenance Loan) and not loans from a private lender, they'll be wiped after 25 – 40 years (depending on what plan you're on).
Find out how much of your loan you'll have likely paid off before it gets wiped using this Student Loan repayment calculator.
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You should pay off your Student Loan as soon as possible
The decision of how and when you repay your loans is entirely up to you. However, it's not always worth trying to repay your loan early.
Repaying early would reduce the amount of interest you pay overall. But not all graduates do repay the debt in full before it gets wiped. So, if you try to pay your loan off quickly, there's a chance you could end up paying off more money than you would have otherwise.
If you're thinking about repaying your Student Loan early, do plenty of research to work out if it's the best option for you. It could be worth speaking to a financial advisor for guidance based on your circumstances.
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All universities are allowed to raise tuition fees
Back in 2012 when tuition fees had a big increase, we were all told that only the top unis would be charging £9k. But as we all know, everyone ended up jumping on the bandwagon and charging full whack.
Some people worry that a similar thing could happen again. But as things stand, universities are only allowed to increase tuition fees in line with inflation. This is why fees increased from £9,000 a year to £9,250 a year in 2017/18.
In 2019, the Augar Review suggested universities lower tuition fees from £9,250 to £7,500. However, it's been announced that tuition fees will remain capped at £9,250 up to and including the 2024/25 academic year.
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The government keeps changing your loan's interest rate
Understanding the interest rate on your loan can be a total headache. It's very common for students to get this bit wrong. An example of this was when a graduate's letter complaining about the unfair interest on his Student Loan went viral. But as we pointed out, it was factually incorrect.
The maximum interest that the government can currently charge on Plan 2 Student Loans is RPI+3% and for Plan 5 loans it's just RPI. However, RPI naturally goes up and down over time.
So, when you read about Student Loan interest rates going up, that's not generally because the government has changed them. It could be because RPI has gone up with inflation.
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Bailiffs will come if you don't repay your Student Loan
You'll never be expected to keep up with repayments if you're out of work or earning below the threshold.
Better still, you won't even be responsible for sorting out the repayments yourself. They'll be automatically deducted from your salary each month without you having to do a thing. Although, keep an eye on your payslips to make sure you're not paying it back too early.
If you're self-employed, your repayments will be calculated when you submit a self-assessment tax return.
All of this essentially means you'll only pay back your Student Loan when you're able to. Debt collectors won't come demanding payments.
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You can avoid tuition fees by studying outside of England
This one does have some truth to it but is mostly a myth.
Firstly, tuition fees are usually only free in Scotland for Scottish residents. So if you're an English student looking to escape the £9k+ a year fees, Scotland isn't your answer.
You have to live in Scotland for at least three years prior to applying to university to be eligible for the free fees. And even then, your application might be denied if they think you've moved there just to get free tuition fees.
You could possibly get cheaper tuition fees by studying in another country instead. But, Student Finance won't be available to you. You'll have to use your own savings or a part-time job to cover your living costs while you study.
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You start repaying your loan as soon as you graduate
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You won't be expected to start repaying your loan until the April following your graduation, at the earliest. So, if you graduated in June 2023, your first payment wouldn't have been taken any earlier than April 2024.
This means your first year of post-uni life is pretty much payment-free. And even then, you'll only start repaying if you get a graduate job with a salary over the repayment threshold.
Even if you drop out of uni, you don't start long-term repayments until the following April. However, if you drop out mid-way through the term, you might need to repay the part of the loan that covers the rest of the term immediately. There's more info in our dropout repayment guide.
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Your parents have nothing to do with your finances at uni
Whether we agree with this is another question altogether. But it's worth clarifying that the government does expect your parents to be involved in your finances at uni.
The government decides how much Maintenance Loan you should receive based on your household income. This is because they expect your parents to make up the shortfall.
For context, students in our latest National Student Money Survey received an average of £171 a month from their parents.
The assumption is that wealthier parents can afford to foot the additional cash to put their child on an equal playing field with those from lower-income households who receive the maximum Maintenance Loan.
In reality, some students will get more financial support from their parents than the government recommends. Some, however, won't receive a penny.
Although the government uses household income to decide how much your loan should be, it's only a guideline and not an obligation for parents to cover the shortfall.
Wondering how much the government 'expects' your parents to supplement your loan? Use our parental contribution calculator.
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Your student debt will affect your credit score
Your credit score is crucial in determining whether you're accepted for financial commitments. It can affect everything from your phone contract to getting a mortgage on your first house.
A lot of students worry about how their credit rating will be affected by having a large chunk of debt.
The good news is that your Student Loan debt won't appear on your credit report, so it won't affect your score at all (phew!).
The only way they'll know if you have a Student Loan is if they ask you as part of the application process. And, they'll likely only do so to calculate your net earnings.
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Your Student Loan will stop you from getting a mortgage
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Your Student Loan repayments do affect your mortgage application to a small extent. But, it's unlikely they'll ever stop you from getting a mortgage altogether.
When applying for a mortgage you'll undergo something called an 'affordability check'. This is where a mortgage lender checks your monthly incomings and outgoings to see how much you can afford to pay each month. They'll decide how much to lend you accordingly.
With your loan repayments coming out of your salary each month, you'll technically be able to afford a smaller mortgage repayment than if you had no Student Loan.
However, the amount you repay is very small in the grand scheme of things (if you're on Plan 2, it's 9% of anything you earn over £27,295). So, it shouldn't make much of a difference. It certainly shouldn't impact your ability to actually get a mortgage.
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You need to pay for master's degrees yourself
Since August 2016, the government has been offering Postgraduate Loans for master's students in England. In 2024/25, Master's students in England can apply for up to £12,471.
If you're not from England, see our guides for master's students from:
It's important to note that the £12,471 loan is intended to cover both your tuition fees and living expenses.
Tuition fees for most master's courses sit at around £9,000 – £11,000. This means that the loan will likely cover your tuition fees, but potentially not all of your living costs.
In 2018, the government also introduced Student Loans for PhD students from England and Wales. In 2024/25, you could receive up to £29,390 for the entire course (the exact amount varies depending on whether you're from England or Wales).
As master's courses tend to be expensive, some students choose to study in Europe instead, where it can be a lot cheaper (or even free!).
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You don't repay your Student Loan if you move abroad
As much as we'd love this one to be true, it's a myth that you don't have to repay your Student Loan if you move abroad.
No matter where in the world you live, if you're earning over the repayment threshold, you should be making Student Loan repayments.
You'll need to let Student Finance know you're working abroad and set up your repayments. It won't happen automatically as it does in the UK.
If you don't repay the amount you should, you'll be expected to pay the backlog of months you've missed (sometimes as a lump sum!) when you return to the UK. So, it won't work as a trick to defer payments either.
Looking for more essential info on your finances? Head over to our guide on the vital money lessons you should have been taught in school.
