What happens if you do not pay your Student Loans back?
Education has become one of the most expensive things in the world. As a student, you may want to take a loan for yourself. There are a lot of things that you consider before taking a loan. The biggest thing you would want to learn is what will happen if you cannot repay the loan.
Quick Takeaways
- As most of the students are not able to repay the loan taken, the government starts deducting the instalment of you from your pay as tax.
- It will be deducted from your pay even before it will reach your account.
- There are four different types of plans that you can take as a part of a student loan.
- Based on the type of plan you have taken, your loan may get forgiven.
However, you must read till the end so that you get a better understanding of what will happen if you do not pay your student loan back.
What happens if you do not pay your Student Loans back?
The very first thing to understand is that very few students completely repay their student loans taken by Student Loan Company funding for a variety of reasons. The main reasons are high-interest rates combined with a relatively high repayment threshold. The finest way to consider the loan is as a tax. The money is deducted from your paycheck before it reaches your account. It will help you to eliminate any confusion or effort on your behalf. The amount deducted is frequently insignificant in comparison to your total salary. As a result, you are very unlikely to pay off your debt.
Though the numbers quickly add up, and you may begin to wonder how you will ever pay it off. Many students, particularly those who are just starting university, are concerned about this. It is because they have been told that getting into debt will only lead to trouble. Obviously, it can be trouble for you if you are unfamiliar with the inner workings of student debt. That is why the majority of people have written off before making even a partial payment. However, there are many people who may anonymously pay your loan back. So if you are lucky enough your loan may get paid by them.
What are the different types of plans that you take as a student loan?
To get a student loan you will have to apply for it. But which plan to choose is a problem. Following are the four different types of loans that you may take-
Plan 1
- If you meet the following conditions you come under this type of plan-
- A Northern Irish student who began an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998.
- An EU student who began an undergraduate degree program in England or Wales on or after September 1, 1998, but just before September 1, 2012.
- Or an EU student who began an undergraduate or graduate course in Northern Ireland on or after September 1, 1998.
Plan 2
If you meet the following conditions you come under plan 2-
- Someone who decided to take out an Advanced Learner Loan on or after August 1, 2013.
- Someone who decided to take out a Higher Education like University Short Course Loan on or after September 1, 2022.
- An EU student who had begun his/her undergraduate course in England or Wales on or after September 1, 2012.
- An English or Welsh student who began an undergraduate course in the UK on or after September 1, 2012
Plan 3
If you meet the following conditions you come under this type of plan-
- You are an EU student who began an undergraduate or postgraduate course in Scotland on or after September 1, 1998.
- You are a Scottish student who began his/her undergraduate or postgraduate course anywhere in the UK on or after September 1, 1998.
Plan – 4 Post-graduate plan
The following conditions depict if you are in this plan or not-
- An EU student who began a postgraduate course on or after August 1, 2016
- An English or Welsh student who received a Postgraduate Master’s Loan or Postgraduate Doctoral Loan on or after August 1, 2016, and August 1, 2018, respectively.
Will unpaid student loans be forgiven?
Yes, many times unpaid student loans are forgiven by the government. Though the time when it will be forgiven will depend on the type of plan you have taken. Following are the tables that show the forgiven period for different plans-
| PLAN 1 | |
| Academic years in which you take the loan | The time when it will forgive |
| 2005-2006 and before it | When you turn 65 |
| 2006-2007 and after it | After 25 years of the first April when your first repayment was due. |
| PLAN 2 |
| After 30 years of the first April when your first repayment was due. For this plan, there is no specific plan year. |
| PLAN 3 | |
| Academic years in which you take the loan | The time when it will forgive |
| 2005-2006 and before it | It will be forgiven when you are 30 or 65 years old. This will depend on what comes first after the first of April when your first repayment was due. |
| 2006-2007 and after it | Once again after 30 years of the first April when your first repayment was due. |
| If you are a postgraduate |
| If you are a postgraduate student, your loan will be forgiven after 30 years after the first April when your first repayment was due. |
What happens if someone who has taken the loan dies?
When the person who has taken the loan dies the student loan company will cancel the loan taken by the student. All you need to do is to inform them and give them proper evidence like the death certificate that the person is dead. In addition, you must be able to give the customer the reference number of their student loan to them.
How does a student loan affect your credit ratings?
If you are making your repayments on time, it will not affect your credit system. Additionally, it will also not show up on your credit card. However, you must know that if you are looking for a home loan, it will only be given to you if you are repaying the loan on time.
Conclusion
Taking up a loan and not being able to repay it back is one of the most difficult things. You would have many doubts regarding it. When you are not able to repay your loan back it will start being deducted from your salary just like a tax. Though if you are unable to repay it you may not be eligible to get a home loan. Also, your loan may be finished after a certain period of time depending upon the plan you are at.
