Student loans are the only way for many students in the UK to pay for school. For this reason, a company called the Student Loan Company has been set up.
Since students no longer get grants and have to pay their own tuition fees, which is something that just started happening in the last few years, most of them graduate with a lot of debt.
The interest rates on these loans are very high, but they are not set that way to make a lot of money. Instead, they are set that way to cover the interest rate on the open market. Also, the borrower doesn't have to pay back the loan until he or she has a set salary. The Student Loan Company contacts all of its borrowers once a year to tell them how much money they need to make before they can start paying back their loans. The borrower then says how much money they make and has to show pay stubs from the last three months to prove it. The Student Loan Company then checks to see if they need to make payments. If they don't, the loan is put on hold for another year, and the process starts all over again. The best thing about this system is that the borrower's loans, which can be up to four in most cases (one for each year of schooling), are all kept in the same place. Since the first loan has been held for longer than the fourth, the interest rates are calculated separately for each one. Also, the loan amounts would be different, but the repayment would be calculated to cover all four. This would mean that instead of four separate payments each month, only one would be made.
If a borrower doesn't make enough money within a certain amount of time, the loans are paid off and the debt is written off. This is done because most college graduates will go on to earn salaries that are higher than average and will be able to pay off their loans. It also gives people a safety net if they don't make a lot of money, since the amount that many students borrow can make the payments quite high.
