If you are considering studying a degree course or your child is then you may be considering whether a student loan is a good idea. There are many people that have concerns about this and because the courses are so expensive it is not surprising. However, there are many advantages as well and it is good to weight up the pros and cons.
Advantages
- A student loan may allow you to be able to afford to pay for a course that you would not otherwise be able to afford. The course could provide you with a qualification that will lead to you getting a better paid job or a career that you really enjoy.
- You will not have to start repaying the loan at least until the course is completed.
- The repayments on a student loan are means tested, this means that if the graduate is not earning much money they will not be expected to repay.
- The repayments are taken out using a tax code. This means that employed students will not have to worry about repayments, they will come out automatically when they are paid and they will not have to worry about them.
- If the loan is not repaid once thirty years have passed the government will write it off. This means that potentially nothing will be repaid if the graduate never finds a job, but all of it might be if they are in a high paid job from the time that they leave university. What this does mean is that the graduate will only repay what they can afford and they will not necessarily pay it all. A majority of students do not repay their loans in full, either because they do not have a job that pays highly enough or because they take a break from work to have a family or care for loved ones.
Disadvantages
- A degree takes at least three years to study for and it means that you will spend three years out of the workforce. This could mean that you will miss out on work experience for three years which could put those who did not choose to study at an advantage. This will of course, very much depend on the career that you go into and whether a degree is essential before you are allowed to start.
- Although the student loan will not show up on your credit report it will be taken into account when taking out a mortgage. This is because mortgage lenders will want to check that you have enough money to be able to afford the repayments and will therefore do a closer check of your finances to see whether you have enough income left after your bills to afford the repayments.
- Some people get worries about being in debt and having a loan for thirty years can be stressful for them. Hopefully if they can think of it as a graduate tax scheme (which is what other countries call it) rather than a loan, this will help.
- There is a worry by some people, that if a graduate leave university with a loan, this might encourage them to borrow money for other things as well because they feel borrowing is acceptable. Although it would be concerning if they just started borrowing money for no good reason, it is worth remembering that borrowing is not always a bad thing. Borrowing for a house, when you can afford the repayments can be a good reason for borrowing money and there are many other examples of good debt as well.