If your child is about to head off to university they can expect to leave with a debt as well as a degree. The typical student in England graduates owing more than £44,000, according to the Sutton Trust – and that’s a lot of debt.
But student debt isn’t like ordinary debt, because you don’t necessarily have to pay it back. Students don’t start to repay their loans until they earn at least £21,000 a year. They then pay back a fixed 9 per cent of the amount above the threshold. In other words, if your child leaves university and lands a job earning £22,000, they would pay £90. Anyone who earns less than £21,000 doesn’t have to pay back anything at all. The debt is also wiped out after 30 years, so many people repay only a portion of the amount owing. In fact, about 70 per cent of students who graduated in 2015 are not expected to clear their debts, according to the Institute of Fiscal Studies.
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