Can Student Loans Be Included in a Debt Management Plan?

Most modern government student loans are repaid under income-based rules and are not normally included in a Debt Management Plan (DMP). Older mortgage-style loans and private education loans need different checks.

In this article, we’ll:

•  Give you tips if you’re behind on student loan payments 
•  Talk about old-style and new-style student loans 
•  Discuss if student loans can be part of a Debt Management Plan (DMP)
•  Explain how you might delay paying your student loans
•  Look at other options if you’re having a hard time paying your debt

The first step is to identify the loan type and any arrears separately from your other debts.

Can Student Loans be Included in a Debt Management Plan? 

Debt management plans are informal debt solutions which is why many people are often confused about what types of debt can be included within them. 

A standard DMP is generally used for non-priority unsecured debts such as credit cards, overdrafts and personal loans. It does not cover every debt merely because it is unsecured.

Modern income-contingent government student loans are normally kept outside the DMP and repaid under their statutory scheme. A DMP for other debts does not reduce or replace those student-loan obligations.

Ask a debt adviser to check older mortgage-style loans, any arrears and private education borrowing individually. The label “student loan” does not establish which rules apply.

A DMP may still help with other debts while the correct student-loan payment is allowed for in the budget.

For income-contingent loans, repayments depend on earnings and the relevant plan threshold; you do not use the old mortgage-style deferment application. Eligible borrowers with mortgage-style loans must apply to the loan administrator for deferment and renew it when required.

What is the Difference between Old-Style and New-Style Student Loans? 

Government loans made for courses beginning before September 1998 are generally mortgage-style; loans for courses starting from September 1998 are generally income-contingent. Later repayment plans also depend on the funding body and course dates.

Mortgage-style loans were provided under the older scheme and are governed by their agreements and relevant consumer-credit rules.

They normally have fixed monthly repayments, commonly over five years; some borrowing spans a longer repayment schedule. The agreement and number of loans matter, rather than a simple rule based on whether the course lasted three years.

Income-contingent loans include several repayment plans with different thresholds, interest and write-off rules. Check the plan shown in your Student Loans Company account.

Repayments are usually collected through PAYE for employees or Self Assessment where applicable. Borrowers living overseas must keep the Student Loans Company informed and may have to pay it directly.

For modern loans, the applicable income threshold determines when repayment is due. See the current repayment rules and thresholds; they vary by plan and can change.

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What to Do if You’re in Arrears 

Check why arrears arose, which organisation is collecting them and whether the calculation is correct. Pay particular attention to missed overseas assessments or information requests.

Contact the loan administrator promptly and keep records. Disputing an amount or applying for help is different from simply stopping payments.

Free debt advice can help you build a budget and prioritise urgent commitments. For the different government loan schemes, see National Debtline’s student-loan guide.

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Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you proceed with a debt solution through The Debt Advice Service. MoneyHelper offers free, impartial money guidance and help finding free debt advice.

Are You Struggling with Student Loans?

A DMP provider cannot ordinarily negotiate a replacement monthly instalment for a modern government loan instead of the statutory income-contingent calculation.

If the modern-loan deduction appears wrong, check the plan, income information and repayment records with the Student Loans Company or payroll as appropriate. For mortgage-style loans, ask about deferment, arrears arrangements and any applicable cancellation conditions.

A DMP offer for other debts should use the money left after essential expenditure and required commitments. It does not force all creditors to accept the offer or guarantee that every balance will stop growing.

Private education loans have their own contracts and may be considered differently from government student loans. Ask an adviser to assess the agreement, security, any guarantor and the available repayment options.