How to Avoid Student Debt Traps: Everything you need to know

Introduction 

Graduation season is fast approaching, and with that the end of an era comes to an end. We are finishing school, and entering into the big bad workforce. With that comes a multitude of responsibilities, including repaying back student loans. 

When paying back your student loans, the one thing you don’t want to fall into is student debt traps. That is financial situations or decisions that can result in students accumulating more debt than is needed. This usually stems from a lack of understanding the long-term consequences and financial burden/strain it can have on a person. 

However, as daunting as it sounds, the process is easily avoidable. It’s all about being sensible, practical and smart with your money, and the overall amount you are borrowing. Remember, it is a loan not a free payment. This means you are going to have to pay that money back!

Defining key terms

But before we get into the advice, let’s go over some key terms. 

Student loans are a form of government-backed financial aid, designed to help students pay for their education. It is offered to under-graduate students to help cover their tuition fees, living expenses. These loans must be repaid, alongside interest. Repayments start after graduation, when income goes over a certain threshold. 

In the UK, students are offered SFE (student finance England) through Students Loan Company (SLC), a non-profit, government-owned organisation. Students are offered 2 types of loans. The first is a Tuition Fee loan, where students’ entire tuition fee is paid for, and is paid directly to the university. The second is a maintenance loan. This type of loan is paid directly to the student, to help them cover their living expenses, transportation, books and all other school related necessities. Additionally, SFE is offered to postgraduate students but only to their tuition fees. 

So what does it mean to be in student debt? Well it just means that you owe money, because you have borrowed funds you haven’t finished. As previously mentioned, you aren’t expected to pay your loans back right away. So for all the soon to be graduates, there is no need to panic! SLC requires you to earn above the income threshold before you must start paying back. As of 2025, it is £27,295 per year. 

Student debt traps

Whilst, maintenance loans can be very helpful, if not careful you can easily find yourself falling into a student loan trap. That is taking up way more debt that is expected, or struggling to repay back your loans. Because remember, you do have to pay it back!

Most people find themselves in such situations because they don’t fully understand the terms and conditions, making decisions without even considering the long-term consequences. 

Here are some examples of his, so you know what not to do: 

• Borrowing more than necessary just because it is available to you. 
• Not understanding how repayment terms work, moreso what interest rates mean. 
• Switching courses and having to pay more, or dropping out and still having to repay.
•  Not using your loans for the appropriate cause, spending the money on lifestyle and materialistic items rather than as aid for your tuition. 
• Ignoring when SLC attempts to communicate with you regarding missing payments.
• Assuming your debt will just be written off. 

How to avoid the trap

But all the examples listed above are easily avoidable. It’s all about being mindful and sensible. Here’s the guide to avoid the trap: 

• Plan your repayments: Rather than leave it to the last minute and wait until after graduation, plan your debt repayment now. Create a financial management strategy early, the sooner the better. 
• Be sensible about how much you’re taking out: Avoid taking out large loans unless you really need it. Have a realistic amount that you want to borrow, and where available go for cost effective options. 
• Explore Scholarships: Many universities and institutions offer scholarships and financial aid programs. These don’t need to be repaid, and reduces the need for loans. So look into them before committing to a loan.  
• Make sure payments are paid on time: Once you are required to start paying your loans back, stick to your financial management strategy. This will help you avoid ruining your credit score and having to pay higher interest rates. 

Conclusion

Student loan traps are easily avoidable. As long as you’re smart, sensible and mindful of how much you borrow, you will be fine. Just remember a loan is required to be paid back, so before taking one out explore all options and remember the decision you make now, have a huge impact on your future. 

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