7 student loan myths that cost graduates money

Student loans in the UK work completely differently from other debts. Here are the myths you need to stop believing.

Myth 1: "I should pay it off early"

**Reality:** For Plan 2 loans (post-2012), most graduates will never fully repay. The loan is written off after **40 years**. Overpaying means paying back more than you would have otherwise — unless you're a very high earner.

Myth 2: "It affects my credit score"

**Reality:** Student loans do NOT appear on your credit file. They won't affect mortgage or credit applications.

Myth 3: "It's real debt"

**Reality:** It functions more like a **graduate tax**. You only repay 9% of earnings above the threshold (£27,295 for Plan 2). Earn below that? You pay nothing.

Myth 4: "I should include it in my debt calculations"

**Reality:** Debt advisors don't count student loans as debt. They're irrelevant to DROs, IVAs, DMPs, and bankruptcy.

Myth 5: "Bailiffs can collect student loan debt"

**Reality:** The Student Loans Company takes repayments through PAYE or Self Assessment. No bailiffs, no court action, no enforcement agents.

Myth 6: "I owe £50,000 so I'll pay back £50,000"

**Reality:** Most Plan 2 graduates will repay only a fraction of their loan before it's written off. The balance is irrelevant — only your earnings matter.

Myth 7: "The interest rate is outrageous"

**Reality:** The interest rate is high on paper, but since most won't fully repay anyway, the rate is largely meaningless for most graduates.

When early repayment DOES make sense

Only if you're a high earner (£50,000+) and your outstanding balance is small enough that you'd fully repay before write-off anyway. Otherwise, keep your money.