How to Deal with Debts from Your Education

Students and those who have left university are well aware that university fees, student loans, and accommodation fees can soon mount up. Debts from your education can last for long after you have left college or university and some, but not all, will incur interest. So should college and university debts be paid off as soon as possible, or does waiting make more sense.

Student Loans

You will probably never get a better deal on a loan agreement than you did with your student loan. Student loans provide low interest rates with a deferment period if you are not earning above a certain amount once you become employed. Although this sounds, and is, a great loan deal, the prospect of leaving university with around £20,000 worth of debt can be seriously stressful.

Paying Back Student Loans

Student loan repayment thresholds vary by plan type. For Plan 1 loans, the threshold is £26,900 per year from April 2026. For Plan 2 loans, it's £29,385 per year. You only make repayments if you earn above these amounts. Interest rates on student loans are based on the rate of inflation. However, even though you are able to borrow a lot more money under the new student loan system, you will need to pay it back a lot quicker. You repay 9% of your income over the threshold - this is not interest. The 9% is the repayment rate on earnings above the threshold, not an interest charge.

To Pay Back or Not

If you are looking to become debt free and trying to eliminate your debts one by one, then student loans should be the last one to be paid. Pay off high interest debts such as credit cards and bank loans first. Your student loans are relatively very low interest and should be the last debts to be cleared.

Debt Priority Planner

Enter your debts and get a prioritised repayment plan with timelines.

Try our Debt Priority Planner free, here on this site →

Taking a Payment Break

New ‘payment holiday’ rules have come into play regarding paying back student loans. If you are due to start paying your loan after 2012 you do have the option of taking a payment holiday of up to five years.

Graduate Loans

Graduate loans will usually be offered by banks and building societies and allow students to merge all of their existing loans and overdrafts into one graduate loan. The interest on these loans begins when graduates are earning a salary, and the interest is usually low or about average compared to normal bank loans. Repayments terms will usually be the same set amount each month and it is in your best interest to shop around and get the best deal that you can.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Student Loan Write Off

Under certain circumstances student loans will be written off. Plan 1 loans taken out before 1 September 2006 are written off when you turn 65. Loans taken out after this date are written off 25 years after the April you were first due to repay. The modern income-contingent student loan system began in 1998. Different write-off rules apply to Plan 1, 2, 4, and 5 loans depending on when and where you studied. Loans are also terminated if you are deemed permanently unfit to work. Student loans, whether you are paying them or deferring them will not usually be marked down with credit reference agencies, and as such, should not have any relevance on future borrowing.

Credit Cards

Students will not usually be offered special interest rate credit cards. If a student does take out a credit card it will usually be the same amount of interest that all customers have. Interest on these cards will accumulate the longer the account exists, so it is always wise to pay off credit card debts before any other type of debt. Debts from your education can soon mount up if you have been financing part of your university life by using one credit card to pay off another.

Struggling with Debts

The good news is that graduates usually earn a larger salary than non graduates but graduates also have a back history of student debts to pay off. If you are struggling to pay off debts from your education then you should seek advice from a credit counselling service. They will be able to give you the best options to suit your situation and will be able to contact creditors on your behalf.

If you attend university then debts from your education will need to be dealt with at some point in the future. But if you have found that since graduating university your job prospects have increased and your pay is above average, then in the long run, these debts can be looked on as an investment.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Debt Priority Planner lets you enter your debts and get a prioritised repayment plan with timelines. Try it now →