Most individuals take out a student loan in order to fund their full-time education. 

While this isn’t usually a problem during your education, it can definitely cause people to go into arrears later on in life. 

In this post, I’ll be looking at how student loans work and whether getting into a debt management plan (DMP) to address them is a good idea or not. 

What to Do if You’re in Student Loan Arrears 

If you’re struggling to make payments on your lines of credit as well as struggling to pay your student loans, then you may need to step back and re-evaluate your budget. 

It’s important that you address this as soon as you can because the longer you wait, the worse your financial circumstances will become. 

You can contact independent debt charities for further debt advice on how to manage your student loans as well as any other debts you may have. Some examples of debt charities doing great work in the UK are Stepchange and Payplan

Always try to avoid debt management companies that charge a fee for offering debt advice. Obviously, if you’re struggling to make your debt repayments, you shouldn’t be taking advice from an agency that charges you money for it. 

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

Student loans can be broken down into two different categories, namely, ‘old-style’ or ‘new-style’. The category under which your student loan falls under depends on when your course started. 

If your course started before 1998, then your loan is an old-style loan. Old-style loans are also known as mortgage-style loans. 

These kinds of loans are registered under the Consumer Credit Act (CCA). Old-style loans are typically repaid over five years if your course lasted less than three years. If your course lasted more than three years, then it’s payable over seven years. 

If your course started after 1998, then it can be considered to be a new-style loan. New-style loans are also known as income-contingent loans. 

As the name suggests, these types of loans are deducted straight from your wages as monthly instalments. 

It’s important to note that deductions will start being made from your wages only after you start earning above a certain threshold. 

debts debt management plans

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. 

DMPs cover all types of unsecured debts. Debts that are priority debts and/or secured debts cannot be included within a DMP. 

Student loans are non-priority debts and thus, they can be covered by a DMP

If you’re considering getting a debt management plan for your student loans, it’s a good idea to get debt advice from a professional before setting it up. Your potential DMP provider can provide you with advice regarding this as well.

This is because there’s a chance you may be able to manage your student loans without actually getting into a debt management plan. 

If you’re earning below a certain threshold per annum, then you can apply to defer your student loans. This can give you enough breathing space to improve your financial situation.

How can My Student Loans be Deferred? 

The process for deferring your student loans is slightly different depending on whether you have an old-style or a new-style loan.

For Old-Style Loans

If you have an old-style loan and are having trouble repaying it, then you can try applying to get it deferred. The loan can be deferred if you’re earning below a certain threshold. 

For example, the threshold for deferral is if you’re earning less than £29,126 gross per annum or £2,427 gross per month. 

You can contact your creditors and request them to defer your loans if you’re earning less than this. If you have an old-style loan, your creditors will be Erudio Student Loans, Honours Student Loans or Thesis Servicing.

If your creditors agree to defer your loan, you won’t have to make any payments towards them for the next year (12 months).

Please note that interest will continue to be added on your loans even if it is deferred.

For New-Style Loans 

For new-style loans, you don’t have to do anything on your own. Your debt repayment is deferred each year if your income is lower than the threshold for that given year. 

Please note that once you cross the required threshold for your income, you will not be able to negotiate reduced monthly payments with your creditors. 

It’s important to note that all loans that are taken out in the UK after 1st September 2012 will have all outstanding balance written off after 30 years since the first debt repayment was due. 

If you have a new-style loan that was taken out before 1st September 2012, then your circumstances will be slightly different depending on where you reside:

  • If you live in England, Wales or Northern Ireland then, loans taken out before 1st September 2006 are written off once you reach the age of 65. Loans that were taken out after 1st September 2006 are written off 25 years after the first monthly payment was due.
  • If you live in Scotland then, loans taken out before 1st September 2007 are written off when you reach the age of 65. Any loans taken out after 1st September 2007 are written off 35 years after the first monthly payment was due.

Struggling with Student Loans 

When it comes to student loans, negotiating with creditors using a DMP to reduce monthly payments can be quite difficult. 

There’s a chance that your debt management company might not be able to negotiate reduced monthly payments within your DMP. However, what they can do is overhaul your budget so you can better manage your debt within the DMP

Please note that in a DMP, you will only be required to pay what you can afford to pay. Your DMP provider will make sure of that. 

Your debt management company will also help set up your debt management plan and deal with your creditors to ensure that the plan runs smoothly right till its end. 


Just like credit card debts and other forms of non-priority debts, student loan arrears can creep up on you and really throw a wrench in your finances. 

That being said, with the right planning and research, you can definitely get your budget under control and pay off your student debt in no time.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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