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Not a loan: why “student debt” shouldn’t stop you studying

Not a loan: why “student debt” shouldn’t stop you studying

Popular British consumer champion Martin Lewis, known for his hyperactive broadcasting style, might at first seem an unlikely partner for the Russell Group of 24 of the UK’s most imposing universities. So the news that the two parties recently joined forces to criticise the way the Student Loans Company (SLC) communicates with ex-students should be enough to make anyone sit up and take notice.

Essentially their argument goes that the current SLC statements sent out – an example is here – focus on the eye-wateringly large amounts that are supposedly left to clear, instead of listing the much more realistic sums that former students will actually have to repay, based on their current salary. Mr Lewis and the Russell Group have even designed an alternative statement that they say would better reflect the financial realities of paying for higher education tuition fees (such as those charged by Oxford Business College), making it clear that you only start repayment once you earn an annual salary of £25,725.


Mr Lewis has long insisted that even terms such as “loan” and “debt” in this context are misleading as it’s thought that as few as 17% of students will ever earn enough to repay the full amount they have borrowed, which is automatically removed from your record after 30 years. “It should be renamed ‘graduate contribution’,” he argues on his website,, suggesting that the five- or even six-figure “balances” highlighted on current student loan statements were “misleading” and even “dangerous”. “In practice,” he says, “university leavers repay 9% of everything earned above £25,725, unless they clear the debt before that. So whether you owe £10,000, £50,000 or £3million, if you earn £30,725, you repay £450 a year. The only impact the size of the ‘debt’ has is whether you’ll clear what you owe before it wipes.”

Mr Lewis worries that potential students are being deterred from following their educational dreams identifying an “excessive focus on the language of ‘debt’”. As he points out, “If we are going to tell our youth that they’re in debt, we must also educate them on what that actually means.”

What you need to know

1. No-one HAS TO pay off their student loan

It’s simple: if you have taken out a student loan after 2012, 9% of your salary above £25,725 will automatically go to the Student Loans Company until the loan is paid off. But if you never reach that level of earnings – or not for long enough to pay off the entire loan – the amount owing will be cancelled after 30 years. It’s thought around 83% of students won’t pay off the whole amount – and won’t ever be penalised for not doing so. Which means “student debt” is not proper debt at all, as Martin Lewis explains forcefully in the clip below.

2. However much your tuition fees, the amount you repay will be the same

And that’s 9% of your salary above £25,725. So, in the same way that “student debt” is not the same as conventional debt, a student loan is not a proper loan, either. Think about buying a car, for example: repayments on a new Ferrari would always be considerably higher than those for a second-hand Toyota.

3. EU students can also get an SLC loan to study at UK universities

The main difference is that if you go back to your country, the salary level at which you start repaying could be lower (to reflect different living costs). In Spain, for example, earners over €23,333 a year are required to pay a contribution to the SLC; in Poland that figure is around 75,000 Zloty (the equivalent of about £15,000). You can find out the exact figures here. Bear in mind, though, that you will have to keep in touch with the UK Student Loans Company throughout your working life.

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