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What Should I Do If I Can't Pay Back My Student Loans?

If you are having problems with debts and are looking at debt management solutions that will help you take control of everything that you owe then you may run into problems with your student loans. Unlike other debts you cannot deal with some of this kind of borrowing via conventional debt management means.

So, for example, if you decide to go down an IVA or bankruptcy route then you won’t be able to include standard government backed student loans (such as those issued by the SLC (Student Loans Company)) under the umbrella of your chosen debt management solution. These debts will be ring-fenced away from other types of borrowing and, as such, must be treated separately.

To be honest, if you are having money problems you may not find that your student loans are really your main concern here. After all, with standard student loans your obligation to repay what you owe won’t even kick in until you hit a specific level of income (currently set at £15,000).

So, if your debt problems are caused by job loss then you will be given an automatic breather from your student loans commitments in any case. If you aren’t earning at the set qualifying level then you won’t have to pay back anything towards your student loans. Your payments will stop until you earn at that level once again.

In all other cases, however, you will have no choice but to continue with your loans repayment program with standard student loans. What you owe here -- once you hit that qualifying salary -- will be deducted at source from your pay check in any case. And, the charges here won’t be enormous as they are linked to the rate of inflation. In some cases, however, you may be able to arrange a payment holiday if this is an issue although this is unlikely to apply unless you are due to start repaying your loans after April 2012.

You may have different issues, however, if you also took out non-standard student loans or graduate loans. These loans are usually regular loans given out by banks and other financial institutions and, although you may have taken them out as a student, they won’t work in the same way as your standard student loan.

So, for example, if you took out a loan when you graduated from your bank to help you get started and now find that you cannot manage your repayments then you will need to take action yourself. Your repayments here are not linked to your earnings and you have to make provision for them whether you are employed or not.

These loans, however, can be bundled up into specific debt management solutions such as IVAs, debt management programs and bankruptcy. You may also find, if you are having repayment problems, that talking to your original lender might help. They may well be able to help you find a solution to help you sort out your finances without defaulting on your obligations to them.
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