How to avoid paying back a student loan
If you've taken out a student loan at any point in your life, it's likely you'll have heard of various scams and wheezes that could help you avoid paying it off. The great majority of these are borne out of uninformed speculation or urban myth.
You can't, for instance, legally get out of paying back your loan by leaving the country. Nor can you have it written off as part of a bankruptcy. The only surefire way of getting out of paying back the money you borrowed is to earn very little after you graduate and wait for it to be written off.
Mortgage-style student loans
Apply to have your mortgage-style loan repayments deferred if you earn less than the Student Loans Company's earnings repayment threshold for these products. As of January 2013, this stood at £2,318 a month, or £27,813 annually. Check the Student Loans Company website to find out if you qualify. You'll need to provide proof of your income and continue making payments until your deferment is confirmed. If you continue to qualify for a deferment until your loan is written off, you'll have avoided repaying what you owed. Deferments must be renewed annually. Mortgage-style loans were issued to students who began their studies before 1998.
Provide the Student Loans Company with evidence that you're permanently unfit for work through ill-health or disability. If you can produce proof you're in receipt of disability-related benefits, your loan could be cancelled.
Check how long your last student loan agreement has been outstanding. If it's 25 years or longer, the amount you owe will be written off. Your loan will also be forgiven if you were under the age of 40 when your last agreement was made and are now 50 or over, or if you were aged 40 when your last agreement was made and are now 60 or over. It's worth checking. The Student Loans Company has been known to continue taking money from people when it shouldn't.
England and Wales income-contingent repayment loans
Earn less than the Student Loans Company's income repayment threshold for income-contingent loans taken out before 2012. As of January 2013, this stood at £1,316.25 a month, or £15,795 a year. Borrowers start paying back 9 percent of their income over and above this amount when their earnings hit this level. Under the new student loans system introduced in 2012, loans are only repaid once a graduate's earnings hit £21,000.
Keep your earnings below the income repayment threshold until your loan can be written off. Loans taken out by English and Welsh students in or before the 2005/06 academic year are cancelled when they reach 65. Loans taken out in or after the 2006/07 academic year are written off after 25 years from the date they became eligible to be repaid, while those taken out after 2012 are forgiven after 30 years.
Send the Student Loans Company proof that you're unfit for work and receive disability benefits.
Scotland and Northern Ireland income-contingent repayment loans
Make sure your earnings remain below the Student Loans Company's income repayment threshold for income-contingent loans. As of January 2013, this stood at £1,316.25 a month, or £15,795 a year. Unlike in England and Wales, student loan repayment schedules remained unchanged in Scotland and Northern Ireland after 2012.
Earn less than the Student Loans Company's income repayment threshold until your loan can be cancelled. Loans taken out by Scottish and Northern Irish students in or before the 2005/06 academic year are cancelled when they reach 65. Loans taken out by Northern Irish students in or after the 2006/07 academic year are written off after 25 years from the date they became eligible to be repaid, while those taken out by Scottish students after this time are forgiven after a more punitive 35 years.
Pass proof to the Students Loans Company that you're unfit for work through ill-health or disability, along with proof that you're in receipt of disability benefits.
The Welsh Government may provide a partial cancellation of up to £1,500 to Welsh students who took out a maintenance loan in the 2012/2013 academic year when they start repaying what they owe.
Your student loan will automatically be cancelled if you die before it's written off.
The Student Loans Company will only consider cancelling or deferring your loan if your account is up-to-date and in good order.
Missing payments on a mortgage-style student loan will have an adverse effect on your credit file. Income-contingent loans have no effect whatsoever on your credit-worthiness, even if you miss payments or default.
- The University of Northampton: Student finance myths
- Student Loans Company: Deferring your loan repayments
- Student Loans Company: Repaying your loan
- Student Loans Company: Frequently asked questions
- Student Loans Company: Frequently asked questions 2
- Student Loans Company: Partial cancellation of student loan debt
- MoneySavingExpert.com: Should I repay student loan?