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Education Loans for UK

Updated on Nov 15, 2022
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The repayment of a student loan in the United Kingdom begins after the moratorium period (EMI hiatus) or as soon as the individual obtains employment (whichever is earlier). However, interest is levied even throughout the research and moratorium periods. Simple Interest is charged during the study time, and Compound Interest is levied after this period.

Different modes of repayments

There are usually 3 modes of repayment:

  • Simple Interest: In this case, the borrower continues to pay the Simple Interest during his study term. As a result, Simple Interest does not continue to accrue to the Principal amount, and the EMI is merely the Principal amount plus Compound Interest.

  • Partial Simple Interest: In this type, the borrower pays just a portion of the simple interest, with the remainder added to the principal amount. As a result, compound interest is eventually levied on both the principal amount and the remaining simple interest.

  • EMI: In this scenario, the borrower does not pay any money until the moratorium term expires. As a result, the payments are made in EMIs, and Compound Interest is imposed on the Principal amount as well as Simple Interest.

Repayment begins one year after completing a course or six months after finding employment, whichever comes first. However, if you want to lower your EMIs, you can pay the simple interest during the moratorium, known as the Principal moratorium, which provides certain interest reductions.

If you do not find work within a year of finishing the course, the payback begins regardless of whether or not you are working. The following are the typical repayment plans:

Full Deferral Repayment — Students can postpone payment until 6 months after graduation as long as they are enrolled full-time. The payment can be postponed for up to four years, which is the average length of a degree.

Immediate Repayment - Payments on both interest and principal begin in earnest once the loan is disbursed.

The British government's efforts to simplify the Tier 4 student visa have made studying in the UK more challenging, with strict visa criteria. In the United Kingdom, the two-year post-study career route for non-EU international students has long been discontinued.

International students must successfully find work with a UK Border Agency licensed Tier 2 sponsor in order to stay in the UK after finishing their education. Furthermore, they must be paid a minimum of £20,000 each year. In addition, starting in April 2012, the maintenance barrier for international students has been raised, and they must now demonstrate that they have the funds to support themselves while studying.

With enormous liabilities hovering over their heads, international students should seek employment as soon as feasible in order to repay the loans. Students who attend prestigious universities such as London Business School, London School of Economics, or Warwick Business School are more likely to get employment with top corporations worldwide.

The revocation of the UK work permit has had a significant detrimental impact on the employability of international students studying there, as they are likely to postpone repayment of large student loans obtained from their home country. 

The UK government does not even provide OTP (Optional Practical Training) to college students, leaving them with little choice except to return to their native country as soon as the course concludes. With their foreign degrees and lack of experience, international students must then fight to locate suitable employment with a prospective salary that would allow them to pay off their debt.

Repaying student loans entails so much risk that the applicant must give collateral security to the bank or NBFC regardless of the loan amount secured.

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