Do certain companies specialise in students loans?

You can hardly fail to have noticed that the government is making going to university more and more expensive. They have introduced tuition fees, and tightened up the requirements for student grants so much that student loans are more or less the only way most students are able to finance their life at university. Conveniently, the government set up a facility to provide these loans about a decade ago.

It acts just like a normal loan, except that in the first place, the interest paid on it is linked to the inflation rate. Thus, over time, the student loan borrowers are repaying the exact amount that they borrowed in real terms. Borrowers' income level determines the speed at which they repay their loan. They do not have to begin repaying their loan until they are earning at least a specified amount in employment.

These two features make student loans the most sensible and certainly the cheapest way to borrow money that you will ever have the chance to take advantage of. Even though you are able to apply for a loan from the first day of your first year at university, you don't begin to repay the loan until the April following the end of your course. What that does mean, however, is that interest is applied to the capital remaining on your loan directly from the first day you receive an instalment.

As far as your income is concerned, you have to be earning £10000 gross before you have to commence repayments. This is equivalent to £833.33 a month or £192 a week. Once the April after your course arrives, assuming you are earning at least that amount, your employer will start to deduct your payments through PAYE, and if you are self-employed you would pay through the inland revenue's self-assessment system.

The actual amount you pay is calculated by taking whatever you earn over £10000 and working out 9% of that. So, if you are paid £2000 a month, your repayment would be 9% of £1166.67, which is the difference between £833.33 and £2000.

You can make overpayments should you wish, but if you do not then the length of time before you pay off you loans will depend on the amount you need to pay off and the amount you are paying off each month. There is very little point in making overpayments, though, since the interest payments on them are so low that you could make more money from putting the same amount in a savings account than you could save from paying the student loan off.

You can apply for a student loan through your local award authority. Local being where you live rather than where you are studying.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

© AskFinancially.com 2008

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