Student Loans

One of the most highly publicised forms of debt is the Student Loan Scheme. It basically means that all university undergraduates can apply for an interest-free loan from the Department of Education and Employment, via the Student Loan Company Ltd. All loans must be repaid, even if the student fails to complete their course for any reason.

All loan schemes are attached to an individual's national insurance number and subsequent Tax Code. As soon as they start earning above a pre-set amount, scaled deductions are taken directly from their income in order to start making repayments to the Student Loan Company. If you are self-employed, repayments will become due under the self-assessment scheme and will be included in any Income Tax bill or assessment.

Avoiding Payment

There are very few circumstances in which you will not be liable to pay your Student Loan, most of them highly undesirable:

1. You reach the age of 65.
2. You die before the loan is fully repaid (meaning beneficiaries of your estate will not be liable).
3. You become permanently disabled.
4. You receive a 'Golden Hello' from your employer.

Many major employers are now competing for high achieving graduates to work for their companies. A 'Golden Hello' may include an offer to repay any student loans, either in one lump sum or spread out over an initial training period. There would be penalties if you stopped working for that particular employee before you'd completed the agreed period.

You may want to consider raising this issue with an employer when negotiating the terms of an employment contract. If an employer is keen to make use of your education, then there is no harm in asking them to contribute towards it.

Penalties

If a graduate is a non-UK taxpayer and fails to inform the SLC of any income there may be penalties. These are:

1. If a graduate fails to advise the SLC of living overseas (even if they're not earning anything), the SLC can triple the normal rate of interest on any account.
2. If a graduate fails to provide full information of oversees earnings, the SLC can base repayments on an income of twice the UK national average.
3. If repayments are continually missed, the SLC can accelerate the debt, which means a court order can be obtained to recover the full amount in one payment.

Refunds

If you work for part of a particular year and your total earnings average out at less than the minimum amount, you can apply to the SLC for a refund on all repayments deducted at source. Refunds have to be applied for and will not be considered automatically.

Regulations concerning student loans are changing all the time, so check the SLC web site or the student support website for up-to-date, accurate information.