How do you pay your student loans in 2025?

Paying student loans may take 20, 20, or even 25 years, so you may not want to wait until then. You may have other goals like buying a house, starting a business, or saving for retirement. It is a long-term commitment just like a mortgage. However, if you want, you can pay it quickly. The best strategy is to begin payments early in your post-graduation years. You can do that if you earn well in part-time income. You can also consider one if you have a guarantor beside to help you.

What should you know before starting student loan payments?

The HMRC provides the flexibility to begin after achieving a specific income threshold. However, you can start payments if you can manage in your educational years. Here are some facts to know about paying your student loans as a student:

• The more amount you pay while in your education years, the less interest you pay later
• You may get a discount on interest or the overall amount if you automate the loan payments
• Refinancing your student loans pays off the existing loans. In this, you get the renewed terms with interest and other costs. So, you eventually pay a lower amount.

Is there any penalty if you pay student loans early?

There is no penalty if you make extra payments. However, you must agree well before paying early. It is because you would not get any refund for paying extra. Moreover, the student loan debt gets written off after 25 years of starting the payments. You don’t pay anything at all, even if you owe some amount after that. Thus, check when your loan will be written off before making an extra payment.

What does Martin Lewis say about paying the student loan early?

There are multiple misunderstandings regarding student loan payments. The MoneySavingExpert CEO Martin Lewis cracks it for you. Here are some aspects to know about student loans:

• You only start repayments after earning £25000/month or £480/week.
• You pay 9% of the amount you earn above £ The more you earn, the more you pay.
• The loan gets wiped off from the credit report after 40 years (or if you die).
• You pay the repayments through PAYE automatically.
• You must pay the dues even if you leave the country.
• Your step-parent or the parent’s partner’s income also counts.

Here are what payments look like on a Plan 5 Student loan plan.

You can create a budget for payments according to your liabilities. For example- if you earn £35000, you must pay £900/year. Check the flexibility to save money until the year ends. Aspects like Christmas may affect the savings in December. Thus, budget carefully. Eliminate the extra costs and pay the bills.

 If you need to save and pay bills at the same time, don’t worry. You can save the amount now and pay by leveraging a quick cash facility. You may contact a direct lender for a loan with no credit check facility. It helps you finance the bill without encountering any credit footprint. You won’t lose your credit score.

Is paying student loans necessary?

No, it is not necessary to pay the student loans. If you got a loan in 1998, there is no need to pay one. You may feel comfortable paying for one. However, you can get one almost without paying for one. Instead, you can put the money or savings to use better. There are other reasons for not continuing the student loan payments. It may work for some not for everyone. You can avoid paying the loan if:

• You earn more interest on savings (after tax) than the loan costs.
• You may not have debts now, but you may have one in future. So, paying student loans now may affect other payments. Not every loan has the facility to stop the payments if your income drops below the threshold.
• You can put the existing cash to use better. For example, you can use it to save money for a deposit for car finance. It is if you want to buy one anytime soon.

6 strategies to begin payments on student loans

You may consider repaying student loans if you have multiple debts. In that case, repaying the student loan makes sense. It is a high-interest loan, and repayment will improve the credit score. Moreover, it paves the way for other debt payments. Here is how to start your student loan payments as a graduate or a university student:

1) Identify your current payment potential

Check whether you can repay the amount with the help of your guardian. Usually, one pays the student loan individually. Thus, confirm whether you can do so or not. Alternatively, identify your part-time income and the money you can pay. Check whether you can pay some if not the complete amount. The payments must not affect the basic requirements.

2) Pay extra payment

Yes, you can repay the amount with an extra payment if your income allows it. Moreover, you can use windfall gains like- inheritance money, lottery wins or tax refunds. Avoid using this sudden money on your wants or desires. Instead, chop off the student loan payments. It may help you pay more than you must. No, you will not pay over-repayment fees on student loans.

3) Check autopay discounts

As mentioned above, most student loan providers offer autopay discounts to first-time loan payers. You can use it only if you automate the loan payments. It reduces your liabilities on interest payments on student loans. Paying less interest means paying less overall. What could be better than that?

4) Refinance your student loans

It is one of the best ways to reduce your student loan liabilities. Check your current arrangement. Analyse the interest rates in the market. If it falls beyond what you have, refinancing may help. You may get better interest rates and terms on your student loan. It reduces the monthly payments and interest liabilities.

Continue the payments according to the new agreement. However, certain emergencies may affect the payments. Don’t worry. You may get 100 percent acceptance on loans with quick disbursal. It is possible if you meet the eligibility and affordability criteria. Use the loan to settle the emergency without affecting the new payments.

• Revise your budget to repay comfortably

You cannot begin the payments unless you have a good budget in place. You can create one only by limiting or eliminating some of your expenses. It could reduce things like unnecessarily dining out, buying apparel, or making frequent trips. Check out your previous month’s expenses. You can analyse the receipts and the bank statements. It will help you know the things you can cut on and pay student loans. 

6) Analyse the impact on your credit score

A student loan is a long-term, unsecured loan that’s good for your credit history. It helps you ensure a comprehensive one needed for getting low-interest loans/ credit cards. However, paying off student loans may lead to a temporary dip in your credit score. It affects your credit history, and you may witness bad credit.

However, the dip does not last forever. Your credit score may rise again if you take new credits and pay them timely. Don’t pay student loans if this is the only debt in your credit report. Ensure a comprehensive credit history before payments.

Bottom line

Student loans are a long-term credit arrangement and commitment. It is ideal and good for your credit history. Thus, paying the loan may drop your credit score. Identify the right reasons behind paying it early. It could be – considering a mortgage or buying a car. In those circumstances, you may pay it early. Alternatively, you don’t need to pay after 25 years of having one. It gets written off.