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How to deal with your student debt

UK graduates leave university with more debt than American students, according to a report by the Sutton Trust. Over three years, a typical student debt in the UK is £44,000 – more than twice that of students at public universities in the USA, who often study over four years.

It’s a huge amount of debt to have as you start your post-university life, so it pays to understand when you’ll begin repaying money – and if you’ll actually end up writing some of it off.

Student Loan debts

The bulk of any student debt will be made up of student loans. How you pay these back depends on when you started at university – and can get a little complicated.

In essence, if you began studying after September 1998 you pay your loan back through your payroll – as long as you’re earning over a certain threshold. How much that is varies, but it could be a couple of years before you earn enough for payments to be taken. If you’re self-employed, you pay it through your self-assessment form each year.

If you haven’t cleared the loan within 25 to 30 years of starting the course, it’s usually written off, depending on the type of loan you have. In Scotland, it’s slightly longer at 35 years.

Other debts

Of course you may have borrowed more money to fund your studies, and this will need to be tackled as soon as you graduate.

If you’ve been using credit cards, the interest will keep adding up so try to pay them off as soon as you can. Make the minimum repayment at least and avoid missing any instalments.

Your student bank account may have had an interest-free overdraft, so it’s worth looking for a graduate account which suits you and your finances rather than just staying with the same bank. Watch out for any fees if you do go into the red.

Make sure you pay off any bills from your student house. Even if the bill wasn’t your responsibility, if you’re named on it, you will be liable for any money owed, and it could damage your credit rating if it isn’t paid.

Get your address changed too, so if anyone tries to contact you about owed money – or even refunds – they know how to get hold of you.

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