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Is Your Student Loan Interest Rate Sky High?


Ah, the elusive student loan - the essential life-line that so many students feed from. Yet saying this, so few people really know the ins and outs of this hefty debt. Luckily we've done all the hard work for you...

Taking out a student loan is one of the only ways that the majority of people can attend University, however very few understand how this debt works and how it will impact their future.

Did you know...?

  • 1 in 8 people have no idea how much outstanding debt they have left to clear.
  • Almost 50% of people who take out student loans don't know how much interest they're being charged.
  • 1 in 9 didn't know they were being charged interest at all.
According to the latest research from the Debt Advisory Centre, many graduates wish they had done more research before taking out a loan, with 1 in 6 regretting it as they didn't need a degree for their job, whilst a further 1 in 7 claim they'll never be able to pay their loan back. After asking several of my friends, I found that none of them had any idea how their loan worked after graduation, which is a worrying find as it could be hanging around for a further 30 years. Here is a quick breakdown of the most frequent worries regarding student loans, and the sought after answers that you aren't told when you apply for one.

When do I pay my loan back?

The earliest you start paying back your loan is the April after you graduate, but this again depends on when you applied for a loan and how much you earn.

Pre 2012 - you pay 9% of your salary if you earn over £16,910 a year

Post 2012 - you pay 9% of your salary if you earn over £21,000 a year

The amount you pay back takes into consideration whether you get a pay rise, pay cut or lose a job.

How does it work?

Think of your loan as 'graduate tax'. You don't have to do a thing; it simply comes out of your payments when you start earning the threshold for your entry year. However, you may have to make a payment even if you're earning below the threshold. If your salary goes above the weekly or monthly threshold during any given pay period as a result of extra shifts or bonuses, payment will be automatically deducted. If you feel you've been cheated, you can claim money back provided your income is below ?16,910/?21,000 in a tax year.


Half of those with a student loan don't know how much interest they're being charged, and a further 1 in 9 graduates didn't know that they were being charged interest at all. This little known fact is quite an important one, meaning that 14% of people don't know how much outstanding debt they have left to pay. The interest rate for graduates again varies depending on when you received your loan:

Pre 2012 - interest rate is 1.5%

Post 2012 - interest rate is 1.5%

But there is a silver lining - a student loan doesn't go on your credit files.

I'm never going to be able to pay it back!

1 in 7 people believe that they'll never be able to pay back their loan, and research from Money Saving Expert does in fact confirm this, estimating that only those on the higher end of the pay spectrum will find this achievable. However, you're not going to be in debt for the rest of your life. Student loan debt will be cancelled over different time periods, depending on when you received it:

Pre 2005/2006 - cancelled when you're 65

Post 2006 - cancelled 25 years later

Post 2012 - cancelled after 30 years

Maybe the final point is what's caused people not to worry. 44% of graduates say they're not worried about their debt as it's common place, while a further 40% say they don't think of it as debt at all. Ultimately, student loan debt will only affect you if you earn above the minimum threshold. Yet if you're earning under the expected minimum, would that cause you to regret going to University in the first place?
laura durechova grb author

Laura Durechova studied History and American Studies at the University of Sussex, and worked as a content writer for Graduate Recruitment Bureau during her second year of uni.

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