15 tuition fee myths debunked
Student Finance can be a total minefield, but missing the facts can have dire implications. It's time we debunked some of those myths you've been hearing!
Credit: Tim Gouw – unsplash (edited)Student Finance is complicated at its best; totally dumfounding at its worst – and it doesn't help matters when misinformation is constantly being thrown around the place.
In our Student Money Survey this year, we found that a whopping 67% of you don't understand your student loan agreement, with one student commenting:
I am worried about the new terms of paying back loans, I have no idea what is true or if changes affect me.
Arming yourself with the facts when it comes to this stuff is extremely important – particularly at a time when changes are on the horizon – and for many young people, it can even determine whether or not they go to university at all.
And whilst we certainly don't agree with many aspects of Student Finance, it's often the case that the situation isn't half as bad as it first seems.
We hope you'll use this guide to separate fact from fiction, and help spread the (correct!) word about this tuition fee stuff works!
15 tuition fee myths debunked
UK student debt is the worst in the world
This is something we see thrown around a lot in the media, but please don't let this scare you!
Whilst tuition fees in England are indeed some of the highest in the world, it's important to remember that how we pay for university here is so different to the likes of the US that it's pretty much incomparable.
Whilst tuition fees here are high (too high, in our opinion!) student loans are funded by the government and the repayment terms are sympathetic to your personal financial situation.
You'll only ever repay what you can afford (so a manageable percentage of your salary) and if you're unemployed, repayments will be put on hold.
In contrast, private student loan lenders in the US are notoriously unsympathetic of students' personal circumstances. Six months after graduation, they're already knocking on your door looking for repayments whether you can afford them or not.
You need to be wealthy to go to university
This one can genuinely put young people off pursuing their dreams of going to university, which in our eyes makes this the worst myth of them all!
With tuition fees going up again and maintenance grants for students from lower-income households being scrapped this year, it's totally understandable that many might feel they're being priced out of higher education, and be put off the idea of university entirely.
But despite the daunting prospect of graduating with a fairly big slice of debt (current averages sit at around £50,000), there are a few conditions to loans that should (in theory) make university financially accessible to you whether you're from a wealthy family or not (although we're under no illusions here – we know the system is far from perfect).
As sh*tty as it was that the government scrapped the grants, the effects of the additional debt for those who would've previously qualified for the grant are largely psychological.
This is because, unless the government remove the 30 year window in which you repay student debts, or you get a really high-earning job, you won't repay it all (some will barely make a dent in it).
More debt means higher monthly repayments
Whilst these situations will result in you owing more when you graduate (obvs), this won't affect your monthly repayments one iota.
This is because how much you repay each month depends on how much you earn, not how much you owe.
You'll only repay 9% of anything you earn above £21,000 (or above £17,775 if you went to uni before 2012) so the only way this will mean higher monthly repayments is if you've bagged yourself a great job with a tidy lil salary packet (in which case, maybe you won't miss the cash!).
For example, if you're earning £23,000 (so £2,000 above the £21k threshold), you'll repay 9% of that £2,000 (£180) over the course of the year, which works out at just £15 a month.
Again, if you're lucky enough to enter into a high-paid job when you leave uni, you'll repay more. If you're earning £30,000 annually, you'll pay 9% of £9k (the difference between your salary and the £21k threshold) which is £810 a year, or £67.50 a month.
You'll be paying off student debt your whole life
Unless you go to uni later in life (much like this amazing 90-year-old graduate pictured above), your student debt won't be following you around for the rest of your life.
No matter how big your student debts are, if they're government loans (so tuition fee + maintenance loans you get through Student Finance) and not ones taken out with a private lender, they'll be wiped after 30 years (25 years if you went to uni before 2012).
If you go straight into uni from school at 18 and graduate at 21, this would mean your repayments will stop when you're 52 (repayments start the year after graduation), even if you've barely made a dent in repaying them.
Find out how much of your loan you'll have paid off before it gets wiped using this tool.
You should try to pay off your loan as quickly as possible
Whilst the decision of how and when you repay your loans is entirely up to you, it's worth weighing up your options here.
We'd almost always advise against paying your loan off early. Whilst it would reduce the amount of interest you pay overall, in most cases it's extremely unlikely you'll even get to the point of paying off your accumulated interest at all before the 30 years are up and it gets wiped.
Therefore, if you start trying to pay your loan off quickly, you could end up paying off money that you wouldn't have paid back otherwise.
For those who have serious hopes of becoming a millionaire with a mega salary once you graduate (in which case you'll probably be on track to pay off your loan in full before the 30 years are up) – why not look into investing your cash instead?
If the interest on your loan is growing at a rate of 6.1% (which is the current rate for high earners), you might feel pressured into paying the whole thing off if you know you've got the spare cash. However, a savvy investor could easily get a return of 7%+ on that cash- definitely something to think about!
All unis will be allowed to raise fees
Back in 2012 when the last wave of fee hikes occurred, we were all told that only the top unis would be charging £9k, but as we all know, in the end everyone jumped on the band wagon and started charging full whack.
However, if things are to move forward as they've currently been proposed, it should be a bit different this time round.
In order to qualify for raising fees, unis need to first opt in to the Teaching Excellence Framework (TEF), and pass certain criteria in order to be awarded a 'gold', 'silver' or 'bronze' rating.
If a uni receives gold or silver, they'll be allowed to raise fees in line with inflation; if they get bronze, they can increase fees by 50% of inflation.
HOWEVER there is a little bit of truth in this, as it's looking like AY 2017/18 and AY 2018/19 will function as two trial years for TEF, during which any uni that opts in will be allowed to raise fees. This means any uni opting in to TEF will be increasing fees to £9,250 this autumn – more details here.
It's worth mentioning that not all universities have opted in to TEF (33 institutions in England haven't opted in to the second trial year) but we still don't know details of which unis have chosen to ditch the new framework – we'll let you know when we do.
If you can't find a job, you'll struggle to keep up with repayments
You'll never be expected to keep up with repayments if you're out of work or working in a job that pays below the £21,000 threshold.
Better still, you won't even be responsible for sorting out the repayments yourself, as they'll be deducted monthly by your employer before you're paid each month (although keep an eye on your pay slips to make sure you're not being overcharged!).
However, one thing worth being aware of is that the government have recently announced they'll be freezing the threshold after which you need to start repaying your loan at £21,000 a year until 2020.
As graduate earnings will (or should, at least) gradually increase over time, this means that you could be earning £21,000 a year working in McDonald's soon enough – meaning you'll start repaying your loan earlier than was intended when the loan terms were originally written up.
The government keeps increasing the interest on your loan
We know, understanding the interest rate on your loan can be a total headache, and it's extremely common for students to get this bit wrong. A great example of this is when a graduate's letter complaining about the unfair interest of his student loan went totally viral, but as we pointed out, was factually incorrect.
The maximum interest that the government can charge on student loans is RPI+3%, but where the confusion lies is that and RPI naturally goes up and down over time.
Therefore, when you read about student loan interest rates going up, that's not because the government have changed them, but because RPI has gone up with inflation.
You can avoid tuition fees by studying outside of England
This one does have some truth to it, but is mostly myth! Whilst you could avoid fee increases (and fees more generally) by choosing to study somewhere in Europe (for now, at least, but we still don't know if it'll remain this way once the UK officially leaves the EU), moving elsewhere in the UK to study won't mean you get a better deal.
Tuition is free in Scotland for Scottish residents and non-UK nationals from the EU.
There is a vague possibility you could qualify for free tuition in Scotland if you move there three years prior to applying for university (although apparently they can deny you free tuition if they think you've moved just for this reason). A grey area, to say the least!
You start repaying your loan as soon as you graduate
You won't be expected to pay back a penny of your loan until the April following your graduation, at the earliest. Therefore, if you're due to graduate in June 2017, your first payment won't be taken until April 2018.
This means you have the first year repayment-free, and even then you'll only start repaying if you land yourself a nice graduate job and are earning above the £21,000 threshold.
Your parents have nothing to do with your finances at uni
OK, so whether we agree with this is another question, but it's worth clarifying that the government do expect you parents to be involved in your finances at uni.
The reason the government bases their calculations of how much student loan you should get on household income is because they expect your parents to make up the shortfall to take your loan up to the maximum amount.
The assumption is that a student's parents can afford to foot the additional cash to put their child on an equal playing field with the rest – although we think this a pretty outdated system that makes way too many presumptions about a student's living circumstances.
In reality, some students will get more financial support from their parents than the government recommends, and some won't receive a penny. The issue here is that although the government uses household income in deciding how much your loan should be, supplementing it is only as a guideline and not an obligation.
Student Finance terms are set in stone
This is a difficult one to swallow, we know, but if 2016 taught us anything, it's that nothing the government says is 100% set in stone – even when contracts are involved!
Last year, the government faced a lot of criticism when they decided to retrospectively change one of the terms of the current student loan agreements that were already signed and sealed (see point 7 above for details).
As many have pointed out, if it was a commercial loan provider pulling a stunt like this, they wouldn't get away with it, but the Tories have wriggled their way out of this one by pointing out an all-important clause on page 3 of the student loan agreement that states changes to the agreement can happen at any time.
Unfortunately, this means we can never be totally certain they won't make further changes later down the line, but hopefully the backlash they received on this one will make them think twice next time!
Your student debt will affect your credit score
Your credit score is crucial in determining whether you're accepted for financial commitments, and can affect everything from your phone contract to getting a mortgage on your first house.
A lot of students worry about the rippling affect having a large chunk of debt can have on their credit rating, but the good news is that your student loan debt won't appear on your credit report, so it won't affect your score at all (phew!).
However, where it could affect your mortgage is in something called 'affordability checks'. This is where a mortgage lender checks your monthly incomings and outgoings to see how much you'll realistically be able to pay up each month (and decide how much cash to lend you accordingly).
As your loan will be coming off your account each month, you'll technically be able to afford less of a mortgage repayment each month than you would do if you had no monthly repayments to make, but the amount is so little in the larger scheme of things (i.e. only 9% of anything above £21k) that it shoudn't make much of a difference.
If you want to do a Master's, you need to pay for it yourself
Since August 2016, the government have finally started offering post graduate loans of up to £10,000 for those looking to do a Master's in the UK.
This is the first time loans have ever been made available for postgraduate study, and as Master's courses tend to be on the pricey side, many students opt to go to Europe to for post graduate study instead – where it's a lot cheaper, and sometimes absolutely free.
If you're an English resident, or if you've lived in England for three years for reasons other than education (much like the situation in Scotland – see point 9), you can now apply for the loan.
However, make sure you read through the criteria carefully before you apply to ensure you're eligible. We say this because some prospective students recently had their loans withdrawn after SFE decided they weren't eligible, after all.
If you move abroad your repayments will stop
As much as we'd love this one to be true, this is certainly a myth – and a dangerous one at that!
Being misinformed about this one could see you lumped with a backlog of repayments to make when Student Finance catch up with you, so please don't take this lightly.
No matter where in the world you're living, if you're earning over the equivalent of £21,000 you should be making student loan repayments.
The annoying thing is that you have to take the initiative of contacting Student Finance yourself to let them know you're working abroad and set up your repayments.
If you avoid paying up, you'll be expected to pay the backlog of months you've missed (sometimes in a oner!) so it won't work as a trick to defer payments either (unless you're not earning while you're abroad, of course).
Heard something through the grapevine and still not sure if it's fact or fiction? Hit us up in the comments below!