Understanding the Student Loans Repayment System 2012

It has been pretty well documented in the media that student loans have changed as the hike in tuition fees has come into force. The changes will commence for those students who take loans for courses that start on or after 1st September 2012.

Student Loans Repayment 2011

So what exactly do the changes mean for you? Find out below!

  • It’s important to remember that these changes only impact new students who commence their higher education from 1st September 2012. Those students who started studying before this date will still make repayments based on the old system (even if you’ve still got two years left to complete!).
  • You may not have to repay the loans – ever. This applies to a relatively small amount of people, but if your income remains below £21,000 per year, you won’t have to make any loan repayments (your loan will still continue to accrue interest, however). If your debt still remains after 30 years it will be totally wiped.
  • Loans taken out as of September 2012 may be triple the amount of previous years, due to the huge hike in tuition fees – from just over £3,000, to as much as £9,000 per year in some cases. It’s not all doom and gloom though because universities charging the ceiling rate of £9,000 per year are required to make special bursaries available for poorer students.
  • No upfront fees – this means you don’t need to have pockets full of cash to go to university – the loans are only paid back after graduation, providing you hit the £21,000 repayment threshold. University is still as accessible for everyone, you just need to understand the fact that you’re taking on a whole heap of debt. If you have aspirations to enter the workplace with a high paying job once you graduate, this will be of little consequence to you anyway.
  • Repayments will be around £540 per year lower than they are on the old system. It means that people will have more money in their pocket – but on the flip side it could take longer for people to reduce or pay off the loan completely due to the above-inflation interest that is accrued on the loan.
  • Repayments are the same for everyone no matter how much you borrow. Don’t be put off attending your dream university because they’re charging the highest possible tuition fees. Remember that repayments are based on a fixed percentage of your earnings over £21,000 – therefore everyone makes the same repayments (relatively speaking) – whether they borrow £6,000, or £9,000.
  • Part time students are now eligible for a loan for the first time ever. Previously part time students were not eligible to get a loan for tuition fees – they are now though! Part time fees have risen in some cases though, and they’re now capped at £6,750. This is significantly higher than in years gone by, but the fact is you don’t need to cough up the cash from the outset in order to pay for your studies.

There has been lots of panic and misinformation spread by people who don’t fully understand the implications of the new student loans system. The fact is that you’ll have to be earning much more than people in years gone by to even consider paying back your student loan. Don’t forget that you’ll also be around £540 per year better off. The obvious downside is that above-inflation interest rates are being charges, which for some people will mean that it takes much, much longer to clear their debt.

If anything the new student loans process should make students think twice before taking on so much debt. If you’re planning on attending university for a three year party you might want to give it a miss. If you want to attend university in order to make an investment in your education and your job prospects, the new loans system is more than accommodating – you just need to understand it’s not a cash prize – you have to pay the money back.