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Studentbeans.com easy guide

Student loans

Student loans - where would we be without them? (Answer: Living in a bin bag). The problem is they can be tricky to understand, luckily we’ve put together all the info you need in this lovely guide.

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What's in this guide

Last updated September 06 2011

Tuition Fee Loans

The Tuition Fee Loan - as the name would suggest - covers your tuition fees for each your of your university course. It is paid directly to the university or college, which means there’s no temptation to spend it (not that you would, obviously).

The maximum tuition fees that universities can charge are as follows:

2011/12 entry - £3,375

2012/13 entry - £9,000 (check here to see how much various universities are planning to charge, subject to government approval).

Exceptions

Wales - If you come from Wales then the government is planning to provide financial cover for anything above the £3,375 threshold, regardless of which UK country you choose to study in. However, it is important to note that these plans are yet to be voted on by the Welsh Assembly and are therefore subject to change. Anyone coming into Wales to study from elsewhere in the UK will still be subject to maximum £9k fees.

The EU - Students from EU countries outside the UK will be asked to pay up to £9k tuition fees in English universities, but will be charged £3,375 a year in Welsh universities (again depending on the Welsh Assembly vote).

Scotland and NI - Scottish and Northern Irish authorities are yet to confirm how much students from their countries will be charged for tuition fees from 2012 onwards.

Maintenance Loans

Maintenance Loans are intended to help you with living costs, and are available to all full-time students under the age of 60 (or 50 in Scotland). The loan is paid to you in three installments: one at the start of each university term.

The maximum yearly Maintenance Loan available for students starting university in 2011/12 is:

  • £3,838 if you’re living at home

  • £4,950 if you’re living away from home but outside London

  • £6,928 if you’re living away from home in London

The maximum yearly Maintenance Loan available for students starting university in 2012/13 is:

  • £4,735 if you’re living at home

  • £5,500 if you’re living away from home but outside London

  • £7,675 if you’re living away from home in London

Please note that in your final year, the student loan amounts will be lower because they do not cover the summer months after you’ve left uni.

The Maintenance Loan is split into two parts:

  • The first part is guaranteed - everyone gets it regardless of their household income.

In England and Wales 72% of the Maintenance Loan is guaranteed, although in Scotland it is significantly less (if you’re from Scotland and have a household income of over £61,000 a year, you will only receive the minimum loan of £915 a year).

  • The second part is decided according to your household income (i.e. what your parents earn).

Getting the full maintenance loan - To receive the full Maintenance Loan, your parents’ income must fall under a certain level (around £50,000 in England, £40,000 in Wales and £20,000 in Scotland).

The income effect - If your parents income is higher, then the second part of the loan decreases. If your household income is above £57,708 in England, £61,000 in Scotland, £50,000 in Wales and £56,000 in Northern Ireland then you won’t receive anything on top of the guaranteed loan.

How to apply for student loans

Getting started - If you’re a new student, then visit the Directgov website to register for a student finance account and fill in the online application form.

Proving your income - You may need to provide evidence of your household income or identity if asked (this is done via post).

The form - To complete the process you will be sent a loan declaration form. You must sign and return this in order to confirm that you’re happy with the loans you’re applying for.

Deadlines - The deadline for students planning to start university in 2012 will be announced shortly.

Students from Wales should visit the Student Finance Wales website to register and apply their student loans.

Students from Scotland should visit the SAAS website to register and apply for their student loans.

Students from Northern Ireland should visit the Student Finance NI website to register and apply for their student loans.

Returning students - If you’re a returning student then login here with the Customer Reference Number you were provided with when you first registered.

If your household income was assessed when you applied last year, you will need to fill in a short online application form.

However, if your household income wasn’t assessed last year, your application should be processed automatically. Log into your student finance account just to check your details are all still correct.

All returning students will then receive a finance entitlement letter and declaration form, which they must sign and return.

How much student loan should I take?

Take it all - If you need the entire amount available in order to survive, then obviously take all of it!

Be clever about it - However, financial experts recommend that you take the maximum loan available to you even if you don’t need every penny - but not so you can spend it all! Instead, you can make a good investment by putting the extra cash into a high interest savings account.These pay out more interest than the loan costs, so you end up making a profit just by holding the money.

Saving - Storing extra money in a high interest savings account also means you will have a good resource to borrow from if you suddenly find you need more cash - much better than going off to find a high interest non-student loan when you get desperate.

Don’t be reckless - However, if you think you won’t be able to resist the temptation of spending it all on clothes, then it’s better to just take the money you need and prevent the accumulation of future debt. It all depends on your self-control really!

Interest rates on student loans

A student loan will accrue interest from the date it’s paid out until the date it’s paid back in full.

How it works - The interest rate for student loans is generally set in September each year, based on the rate of inflation from the previous March. For example, from 1st September 2010 until 31st August 2011 the interest rate is 1.5%, meaning that if you borrowed £1,000 to begin with, then by the end of the year you’d owe £1,015. Thankfully, compared to standard loans the interest rate for students is relatively low.

Repayment of student loans

You only start paying your Tuition Fee Loan and Maintenance Loan back when you’re earning over a certain amount:

When will I start repaying?

Courses started before September 2012 - Repayments begin when you earn over £15,000 Courses started after September 2012 - Repayments begin when you earn over £21,000

Earliest payment - If you earn over these thresholds then the earliest student loan payments can start to be taken is the April after you leave university.

How much is taken?

For example... - For any money you earn over the repayment threshold (currently £15,000), 9% will be taken in order to pay off your student loan. This means if you are earning £18,000 (£3,000 over the threshold), you will pay back 9% of the £3,000 i.e. £270 a year.

How is it taken?

Student loan repayments are made in different ways according to your employment situation.

  • If you are employed, then student loans deductions will be made automatically from your salary, just like tax payments.

  • If you are self-employed, you will be responsible for calculating and making your own repayments. Visit Directgov’s Self Assessment page to work out how to do this.

  • If you are living abroad then it is your responsibility to inform authorities and make a repayment arrangement with the Student Loans Company. This is done through filling in the ‘Overseas Income Assessment Form’.

Should I pay back more of my student loan than I have to?

PROBABLY NOT!!

This may seem like odd advice at first, but because a student loan has such a low interest rate charged on it, you won’t necessarily be saving money by paying it back more quickly than you have to.

Don’t pay back more of your student loan than you have to if;

  • You are borrowing any other money at a higher interest rate (a mortgage, credit card, overdraft etc.). Always pay off your highest interest rates debts first!! It’s very unlikely this will be your student loan. These will be costing you much more - growing at a quicker rate than your student loan debt.

  • You are debt free and a saver. By putting your extra money into a cash ISA or higher rate savings account that has a higher % rate than the interest you pay on your student loan, you will make more on this cash than you will save by paying it off your student loan debt.

  • You are likely to need a loan in the future. Any future commercial loan you take out (for a car, starting a business, a mortgage etc.) will be much more expensive than your student loan. It would be better to save that extra money in a high interest account and use it in place of that expensive commercial loan, than to be paying off your student loan with it.

So are there any situations where I should pay back more of my student loan than I have to?

  • If realistically you are not going to save the extra cash and end up spending it (be honest with yourself!) AND you have no higher interest debts to pay off first then paying off extra on your student loan is a good way of making sure the cash isn’t wasted - in a way it’s type of saving for those that have trouble saving, because you are making that payment to your future self (a future self that won’t have to make that extra payment and thus have extra cash)

  • If you’re sure won’t need to borrow in the future.

Paying more than required - If you do want to pay off your student loan more quickly through making voluntary repayments, you can do it in several ways:

When are student loans wiped?

Higher Education Start Date Age at which loan is wiped Death Unfitness to work
1998 - 2005 65 Yes Yes
2006 - 2011 25 years from the first April after you graduated Yes Yes
2007 - 2011 (Scottish students) 35 years from the first April after you graduated Yes Yes
2012 and beyond 30 years from the first April after you graduated Yes Yes

Refunds on student loan repayments

If your income changes - You might not have a constant income throughout the whole year, meaning the annual total of your wages falls below £15,000. If this is the case, then you may wish to claim a refund from the Student Loans Company.

Accidental overpayment - Similarly, if you have finished paying off your loan but for some reason money continues to be taken, you can claim a refund on the overpayment.

In either case contact the Student Loans Company in order to deal with the issue