How student loans work: Student finance explained

Student loans are used to fund tuition fees and the cost of living throughout your studies. The repayment terms on these loans are extremely reasonable.

Most people working towards an undergraduate degree will use student finance to fund their studies. You’ll need to be enrolled in a higher education course to be eligible for it.

The main types of student finance are:

  • Tuition fee loan – paid directly to your university to cover the cost of your tuition fees.
  • Maintenance loan – paid into your bank account to cover the cost of living during your studies.

There are separate student finance organisations for England, Wales, Scotland, Northern Ireland, Jersey, Guernsey and the Isle Of Man. Each has separate criteria with regards to how much funding applicants are eligible for. You can apply for finance directly to these bodies via their website. The body you apply to depends on your residency, not where you’re studying.

Each body will set a deadline for applicants to ensure their funding arrives before the start of the academic year, although it’s possible to apply for funding up to nine months after your course starts.

Am I eligible for student finance?

To be eligible for student finance, you’ll need to have been accepted to study one of the following qualifications:

  • A first degree, for example BA, BSc or BEd
  • A Foundation Degree
  • A Certificate of Higher Education
  • A Diploma of Higher Education (DipHE)
  • A Higher National Certificate (HNC)
  • A Higher National Diploma (HND)
  • An Initial Teacher Training course
  • An integrated master’s degree
  • A pre-registration postgraduate healthcare course

If you’re studying part-time, you could still be eligible for some funding, provided your “course intensity” is at 25% or higher.

You’ll usually only receive funding for your first higher education course, even if your previous course was self-funded. However, there are some exceptions to this rule. If you change course or drop out and start again, you may be eligible for limited funding. The same applies if you’re “topping up” an HMC, HND or Foundation Degree into an Honours degree. Funding may also be available if you hold a higher education qualification and are looking to begin a part-time Honours degree in engineering, technology, computer science or healthcare.

UK nationals or those with “settled status”, who have been living in the UK for at least three years, are eligible to apply. Non-UK nationals aged under 18 who have lived in the country for at least seven years could also be eligible. Non-UK nationals who are over 18 can apply if they’ve lived in the country at least half of their life, or more than 20 years. Some EU nationals and those in the UK under various refugee statuses may also be eligible to apply.

Tuition fees: How much do they cost?

If you successfully apply for student finance, you’ll be granted 100% of your tuition fees per semester. That’s up to £9,250 per semester if you’re studying in England, Scotland or Northern Ireland, or up to £9,000 per year if you’re studying in Wales.

Eligible Scottish students studying in Scotland pay no tuition fees. The costs are completely covered by Student Awards Agency for Scotland (SAAS).

Northern Irish students studying in Northern Ireland will pay a maximum of £4,160 per semester. Tuition fees across the UK vary for international students.

Maintenance loans: How much do I get?

Maintenance loans are typically transferred into your bank account in three segments per year, before the start of each new term.

To be eligible, you’ll need to be studying for:

  • A first degree, for example BA, BSc or BEd
  • An Initial Teacher Training course (degree level or above)
  • An integrated master’s degree
  • Some dental qualifications

In most cases, you’ll need to be living away from your home town to qualify. The amount you get depends on your household income and where you’re studying.

  • If you’re applying to Student Finance England, you’ll receive up to £8,944 per year (or £11,672 if studying in London).
  • If you’re applying to Student Awards Agency for Scotland, you’ll receive up to £5,850 per year.
  • If you’re applying to Student Finance Wales, you’ll receive up to £9,225 per year (or £11,530 if studying in London). Some of this funding may come in the form of a non-repayable grant, worth at least £1,000 (or more for students from lower-income households).
  • If you’re applying to Student Finance NI, you’ll receive up to £4,840 (or £6,780 if you’re studying in London).

Student loan repayment

If you’re Scottish, Northern Irish or started university before 2012, you’re on a Plan 1 loan. Students must repay these loans at a rate of 9% of everything they earn above £18,330 each year. So, if you’re earning £30,000 a year, you’ll pay 9% of £11,670, which is £1,050,30.

If you’re English or Welsh and started university in 2012 or later, you’re on a Plan 2 loan. Students must repay these loans at a rate of 9% of everything they earn above £25,000 each year. So, if you’re earning £30,000 a year, you’ll pay 9% of £5,000, which is £450.

Student loan repayments are deducted automatically via PAYE, or self-assessment if you’re self-employed. If you’re earning less than these thresholds, you’ll make no repayments. If the loan isn’t fully repaid after 30 years, it’ll be written off. (For Plan 1 loans, it might be written off after 25 years, or when you turn 50, depending on the start date of your course).

Understanding student loan interest

For Plan 1 loans, interest is charged at the rate of RPI inflation.

For Plan 2 loans, the interest rate depends on your annual earnings. If you earn less than £25,000 a year, you’ll be charged inflation at RPI. If you earn £45,000 or more a year, you’ll be charged inflation at RPI + 3%. When you earn in between these figures, it gets complicated, as the percentage above RPI rises gradually between 0% and 3%. So if you earn £35,000 (half-way between the two), you’ll pay RPI + 1.5%. If you earn £38,333 (two-thirds of the way), you’ll pay RPI + 2%.

Your interest rate is calculated and will change in September of every year. It won’t change the amount you pay back per year, only the amount of time it takes to clear the debt.

Other sources of student finance

  • Student bank accounts. Bank accounts tend to come with huge overdrafts (up to £3,000), which usually remain interest-free until at least a year after graduation.
    Student bank accounts
  • Student credit cards. Used carefully, these cards can provide a useful buffer – if you clear your balance in full each month, you usually won’t pay any interest on your purchases. However, if you carry a balance from month to month, they’re not a cheap way to borrow.
    Student credit cards
  • Student personal loans. Some loan companies market themselves exclusively to students, although the terms are similar to any type of personal loan.
    Personal loans for students

Frequently asked questions about student finance

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