There are many people that are afraid of student loans. Others use them without any fears at all. Many parents and potential students get concerned about things they have heard about loans and it is important to remember that a student loan is good debt. It is something which should advantage you. It is worth looking at some of the common myths and thinking about whether they are correct.
You Leave University with Massive Debts
It is worth thinking about student loans in a different way to other loans. You do not pay repayments in a regular way and the debt is written off after 30 years regardless of how much you have repaid. The repayments are made through your tax code, which means that you do make repayments in a regular way. Repayments are only made when earnings reach a certain level and they are only a very small percentage of earnings. This means that they are affordable and however much you borrow, the maximum you can repay in a year stays the same and you may not have to pay the maximum if you are not earning enough. This means that how much money you owe is irrelevant.
You Will Never Pay the Debt Off
This could very well be true. It could be the case that you will never be able to repay the debt that you owe. However, this does not matter. Unlike a standard loan, you will not have to repay it all if you cannot afford it. You will have thirty years to repay it and once that time is over, you will not have to repay any more. So, whether you repay nothing or some of it, it will all disappear once the thirty years have passed. Some people will earn enough to repay the whole debt but you have to start on a high income and keep working full time for the whole thirty years.
The Loan Will Make it Harder to Borrow Money in the Future
It is worth noting that a student loan does not appear on a credit report. This means that you will not be penalised for it when a lender is doing a credit check. The only circumstance where it could make a difference is with a mortgage. This is because the lender is likely to check your bank details closely to see if you would have enough money to meet the mortgage payments. Therefore, they will look at money coming in and out. However, if you pay rent already and the mortgage is a similar amount then this should be fine. You should not be taking on more debt than you can afford to repay anyway.
This Loan Will Lead to Loads More
There are people that think because a student starts off their adult life borrowing money, it will make them think that borrowing is an acceptable thing and they will continue to do it. It is hard to know whether this will be true or not as it is likely to vary. It might be the case that they will put off borrowing rather than encouraged to do more as well. Even if they do borrow more this may not be a bad thing. As long as they are borrowing to better their situation and they can manage the repayments then borrowing need not be a bad thing.
The Loan Will not be Enough
Some people worry that loan will not be enough for the student to manage on. It is true that the loan is changed depending on parental income. Every student will get enough loan to cover their fees, but the other part of the loan, to cover living expenses, will be means tested. Each student will get some, but if the household they live in has a high income in it, then there will not be any more money offered.