A Guide To Student Loans

Sarah Jones (Student Money Expert)

Written by Sarah Jones (Student Money Expert) on January 21, 2019

Updated January 14, 2021

Student loans and saving

With university tuition fees averaging £9,250 a year, many students take out loans in order to cover the cost of their education. How, though, do these loans work, and are their alternatives?

Types of student loans

There are two types of student loan:

  • Tuition fee loans: As the name suggests, these cover the cost of your tuition fees. The amount you can borrow is based on your household income. Loans are paid directly to the university.
  • Maintenance loans: These cover the costs of living expenses up to £8,944 per year. Loans are paid into your bank account over three instalments. How much you can borrow depends on your household income, where you live and where you are studying.

Part-time students can only apply for a tuition fee loan if they are studying for at least 30 credits a year (accounting for 25% of a full-time course). Students from other EU can also apply for tuition fee loans but not maintenance loans.

Who is eligible for a student loan?

Your eligibility for a tuition fee loan depends on your household income, the course you are taking, the university or college you plan on attending, your nationality and whether you have received any other student loans in the past. There is no limit on how old you can be to apply for a loan, though it may reduce the amount you can borrow.

Full eligibility criteria can be found on the government’s website. You can also use the site to check if you’re taking a qualifying course at a recognised university and, through the student finance calculator, work out how much you can borrow.

If you are applying for a maintenance loan, you need to be studying for your first undergraduate degree, an integrated master’s degree or a specialist course such as teacher training, dental hygiene, dental therapy or operating department practices.

You normally won’t get approved for funding if you already have a degree, even if you paid for this degree yourself. However, you might be able to get a smaller loan if you change course mid-way through a degree or leave your course and then start it again. You might also be eligible for a loan if you are building on an existing qualification, moving from an HNC, HND or Foundation Degree to a full Honours Degree for example.

Applying for loans

You can apply for both types of loans online by visiting the applicable student loan site. There are different sites for those studying in England, Scotland, Wales and Northern Ireland. You should apply in the Spring before your course starts. Apply as soon as you can so there is no delay in getting approved; don’t wait for an offer or until you get your exam results. Also, remember you have to apply each year, not just when you start at university.

If you are from Jersey, Guernsey or the Isle of Man, you should contact your local authority to find out how to apply for a loan.

Repaying your student loan

You must start repaying your student loan once your income reaches £25,000. Repayments start in the April after your course finished. You’ll then need to repay 9% of any income you earn over the £25,000. So, if you earn £35,000 a year, you will pay 9% of £10,000, or £900, which will be broken down into monthly payments. Your employer makes repayments before your salary is paid.

Interest is charged on your student loans, and this is currently calculated at the Rate of Inflation (RPI) plus 3% while you’re studying. Once you graduate, the interest you pay will depend on how much you earn, starting at RPI only before moving up to RPI plus 3% in stages.

Repayments may differ for those based outside the UK or those living in Wales, Scotland, Northern Ireland, the Isle of Man, Guernsey or Jersey. Check with your lender to make sure you understand repayment terms and conditions.

Other forms of funding

Depending on your level of income or the course you are taking, there may be additional funding available.

Low Income

If the level of funding available from student loans isn’t sufficient and you’re from a low income household, you can apply for additional support from the government or your university or college’s hardship funds. Government support can include income support, childcare grants, parent’s learning allowances, or adult dependent grants.

Bursaries and grants

Bursaries and grants are available for people taking specific courses including teaching, social work and medicine. Some universities also run their own bursary schemes linked to their areas of excellence while postgraduates may be able to get funding for their research from Research Councils. Visit Student Cash Point here on Lending Expert to learn more.

Charitable trusts may also make funding available depending on your level of income and the course you are taking. The Turn2Us website is a good source of information for these grants.

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