How to deal with debts after graduation

If you’re moving away from where you lived at university, there are a few things to think about. Many students will end their tenancy at a rental property after they finish their studies. Make sure you do all that you can to get your deposit back, as the money could help you move into your next home or support you while you look for work. 

Find out how to reclaim your deposit and what to do if you can’t agree with your landlord in our guide Your legal and financial responsibilities when renting

Many universities won’t allow you to graduate if you have outstanding library fines, so make sure you pay them off. It’s important to make sure you don’t have anything left to pay towards accommodation costs, including your utility bills. Unpaid bills can hurt your credit rating.

If you want to qualify for the most competitive loan and credit card rates, you need a good credit score.

Speak to your landlord about getting your deposit back at the end of your tenancy.

Learn more in our guide How to improve your credit score

When you’re going through life changes such as starting a new job, it’s a good idea to get into money habits that can help you for the rest of your life:

• set money aside to reach savings goals, such as a new car or a holiday
• stay on top of daily spending habits, such as buying coffee or regular takeaways, and you could reach your financial goals quicker
• start paying into a pension scheme as soon as possible. This can make a big difference to the amount of money you have when you retire.

Read more on pensions in our guide Why should I save into a pension?

Your student loans are repaid automatically through the tax system once you start earning a certain amount of money. Unless you’re self-employed, repayments are typically taken by your employer and show as a deduction on your monthly payslip.

Deductions should stop once you’ve paid off your student loan. If they haven’t stopped and you think you’ve overpaid, get in touch with the Student Loans Company for a refund.

Find out more in our blog Getting a refund for overpaid student loans.

You don’t have to start paying back your student loan until:

• the April after you finish or leave your course, or
• the April four years after the course started, if you’re studying part-time on a course lasting longer than four years (for courses starting before 1 January 2027 in England).

It might be even longer if you’re out of work or don’t earn above the minimum earning threshold which changes each year.

Your repayments go up or down with your income and pause if your pay drops below the threshold. Any remaining balance gets written off after a set number of years – this is usually 25, 30 or 40 years after you were first due to repay, depending on your repayment plan.

Some people never repay their full student loan.

Yes, interest is added to your student loan for as long as there's a balance left to pay. 

As you only repay a percentage of what you earn above a threshold rather than a fixed amount, interest can build up the longer it takes to repay.

If you have other debts like credit cards or overdrafts, it’s worth prioritising paying these debts, rather than overpaying your student loan as they often charge higher interest.

Your student loan doesn’t appear on your credit file and it won’t affect your credit score in the same way a missed credit card payment or a default would.

But it can still affect what you're able to borrow, especially for something big like a mortgage. This is because your student loan repayments reduce your take-home pay by being taken directly from of your earnings.  

When you apply for a mortgage, lenders will typically ask if you have a student loan so they can take your repayments into account when checking what you can afford.

If you’re preparing to apply for a mortgage, see our guide How to improve your credit score.

Make sure the Student Loans Company has your current address and contact details. If they can't reach you, you could miss important letters.

For example, when you’re close to paying off your loan, you’ll usually be contacted to ask you to switch to Direct Debit to help prevent you from overpaying.

If you miss this letter, repayments could continue to be taken from your pay after your loan has been paid off. 

Keeping your details up to date can also make it easier to get a refund if you overpay. 

To update your details, check your balance and manage your student loanOpens in a new window, visit GOV.UK. 

Unlike other loans, you’ll usually repay your student loan directly from your payslip, in a similar way to how you pay income tax. 

Read more in our guide Understanding your payslip

For the self-employed, this is done when you submit your Self Assessment tax return at the end of each tax year, you calculate your earnings and what you owe in tax and student loan repayments, and then send it to HMRC. You’ll also fill one out if you have self-employed income on top of your normal PAYE earnings. 

If you’re self-employed and don’t make the student loan repayments that have been calculated for you, you could be visited by debt collectors and even be asked to go to court. Find out more on Student Loans CompanyOpens in a new window

If you leave the UK for more than three months after finishing your course, you must tell the Student Loans Company. They will manage your loan repayments instead of HMRC.

If you get a job and are paid in another country, you’ll be asked to complete an overseas income assessment, providing:

• details of your employer

• proof of income.

It’s important to complete your overseas income assessment. If you don’t, you could be charged more interest and build up arrears on your loan. 

You’ll usually need to set up a Direct Debit to make your repayments. The amount you repay will depend on how much you earn.

The repayment threshold in the country you move to may be different from the UK threshold – find out what you’ll pay in Repaying your student loanOpens in a new window on GOV.UK.

If you return to the UK and stay for more than three months, let the Student Loans Company know. This avoids paying twice: once by Direct Debit as an overseas resident, and again through Pay As You Earn (PAYE) if you start working in the UK. 

Read What happens to your student loan if you move abroad?Opens in a new window on Student Loan Study UK to find out more.

Once you leave university or college, you have the choice to keep your student account or switch to a graduate account.

You don’t have to stay with the same bank, so it’s worth shopping around for a better deal.

Your first step is to switch to a graduate account to give you time to repay your student overdraft.

Find out how long your bank will give you to repay your overdraft and when the authorised limit will be reduced.

In most cases, your overdraft allowance reduces slightly every year.

Use this as an opportunity to rebalance your budget after you graduate. Once you’ve paid off your student overdraft, you can switch to an account that offers a switching bonus or better interest for savings. 

Read more in our guide How to choose the right bank account

Allocate some of your income to start reducing high-interest debts from student credit cards, bank loans and your overdraft.

Although your overdraft was likely to have been fee free while you were studying, this interest free period will come to an end. It’s a good idea to pay it off as soon as you can to avoid big interest payments later.  A standard current account overdraft interest is often as high as 40%, which is significantly higher than a typical rate for a personal loan.

Find out more in our guide Overdrafts explained

On any other debts like credit cards or buy now pay later, make at least the minimum repayments and ensure you don’t miss any instalments.

If you do, it could hurt your credit rating and ability to borrow for a home or car in future.

If making sensible cutbacks to meet your repayments isn’t helping and you find that your financial situation is worrying you, getting free debt advice should be your next step.

There are lots of free, confidential services that can provide help and support.

Take a look at our guide Where to get free debt advice

Student debt might tempt you to stop making payments into a workplace pension.

But remember, saving for retirement is vital for your future wellbeing, so only consider opting out of a workplace pension if you consider it particularly necessary.

Read more in our guide How pension auto-enrolment works