A lot of people know about student loans, and if you are paying them right now, or know someone paying them, then you would have heard about how long it takes to pay them back, due to regulations in place. There are also many other factors affecting the way student loans are paid. One of these factors is the passing away of the loan payer. So, you may wonder, what happens to a student loan if the loan payer dies?
Upon the loan payer’s death, the Student Loans Company actually cancels the payer’s debt. Someone, like a friend or a relative will need to inform the SLC about the death of the payer, and show them proof, in the form of a death certificate, along with the customer reference number. No matter how high the remaining balance is, it will be written off.
In the rest of the article, we will be discussing this further, and any other reasons why your debt may or may not be cancelled. You should read on to find out.
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Do your student loans get cancelled if you die?
Your student debt gets erased if you were to die before paying it off. No matter the outstanding amount left to pay, it is always erased if you, or the debt payer dies.
As stated before, someone will need to get in contact with the Student Loans Company, to inform them about the death. They will need a customer reference number, along with proof, such as a death certificate.
To find out more about this, or for some other reasons why your debt may be cancelled, you can click on this link to visit the Think Student website.
Do student loans get cancelled if you cannot work?
If you are completely unable to work due to a disability or illness, you may be able to cancel your student debt. Firstly, you will need to claim one of the four benefits listed:
- Personal Independence Payments
- Disability Living Allowance
- Industrial Injuries Benefit
- Severe Disablement Allowance
You will then need to get in contact with the Student Loans Company, with the following:
- A letter from a doctor, consultant or psychiatrist that states you are permanently unable to work and is dated within the last 6 months.
- A letter from the benefits agency which shows you receive one of the benefits mentioned above. This must be all pages, and the most recent assessment.
If you or someone you know is too unwell to send this evidence, a third party must send this. To find out more about this, you can click on this link to the UK government’s page.
Do your student loans get cancelled for any other reason?
Below are some other reasons your student loan may be cancelled.
Income
To pay back your student loan, you will need to reach a certain threshold of income before you can start paying back. This is not necessarily cancellation, but a time period where you do not pay your student loan, until you have reached that threshold. To find your plan, click on this link to the government’s website.
For example, if you are on plan one, you will pay 9% of any money that is over the threshold, which for plan 1 is £388 a week, or £1682 a month. If you were to receive £2000 for a particular month, you would pay 9% of (£2000 – £1682). To find out more about thresholds, you can click on this link.
Expiration
Your student loan has a ‘expiration date. It will be written off when it reaches a certain time period.
If you are on plan 1 and took out a student loan between the academic year of 2005- 2006, or earlier, your student debt gets written off when you are 65. If you took out your loan after this period, your debt is written of 25 years after your first repayment that was due in April.
For plan 2, your debt is written off 30 years after the first repayment due in April.
If you are on plan 4, and took out a student loan between the academic year of 2006 – 2007, or earlier, your student debt gets written off when you are 65, or 30 years after the first repayment that was due on April.
The one that comes first is the one used. If your loan was later than this, it is written off 30 years after the first repayment that was due in April.
To find out more about this, you should click here to go to the government’s page.
What happens if you do not pay back your student loan?
If you are unable to pay your student loan, it actually is not the end of the world. Many students do not end up paying off their full student loan. You should not really consider it a debt, but more as a tax that is only paid when you receive a certain amount of money.
If you do not earn that threshold of money, you do not pay for your student load. If you are in the situation where that happens for all of your life, then it will eventually be written off.
To find out more about this, you should click on this link to a Think Student article. Or, to find out more information about what your student loan is, you should click here for another Think Student article.