If you’re planning on applying to uni this year, or are starting uni soon you may be left wondering just how do student loans work?
The truth is, it’s actually a lot less complicated than it might seem and we’ve got all the answers to your questions about student finance, how student loans work and everything you can expect from your maintenance loan, from borrowing it to paying it back.
The cost of going to uni in the UK is currently up to £9,250 per year, plus you’ll also need to cover the costs of your accommodation as well as your social life and everyday utilities.
Luckily, the student loan scheme in the UK will help you cover the costs of all of this, and here are the basics that you need to know.
What is a student loan?
A student loan is a loan that you can get from the government to help you cover the costs of the university in the UK.
Every UK student applying for university is eligible to apply for a student loan to cover the costs of both tuition and the costs associated with living such as rent, bills and shopping. Without a student loan, the majority of students wouldn’t be able to afford to go to university, so applying for a student loan isn’t something that should be considered as optional.
Your student loan will cover your 3-4 years in university and after you graduate you will start paying it back in gradual instalments, so you’ll never have to pay it back in one go.
How to apply for a student loan
You can apply for Student Finance UK here: https://www.gov.uk/apply-online-for-student-finance
Once you’ve completed the online application you should receive a letter in the post around 6 weeks later confirming all of your details and how much money you can expect to receive.
Take your time while applying for your student loan and be sure to read every question carefully to avoid making any mistakes!
The application will ask you questions about your family situation and income so you will most likely need to ask your parents/parent for help filling out any financial details you’re unsure of.
You should apply for your student loan pretty much as soon as you’ve decided to start applying for universities, even if you don’t have a confirmed place at uni yet.
What is a maintenance loan?
There are two types of student loans that you will be eligible for, the maintenance loan and the tuition fees loan.
Every student will get the same amount of money for the tuition fees loan, but the maintenance loan will depend on your family’s income and where you are living (as those studying in London will receive higher due to increased living costs).
The maintenance loan is there to help you cover your rent for your student accommodation, food, your social life and anything else you’ll want to pay for while you’re at uni. When you’re applying for a student loan, you’ll be asked questions about your family and your income which will help determine how much you’re eligible to receive.
You can find out more about maintenance loans and how much you could be eligible for in 2023 here.
What are tuition fees?
Tuition fees are paid via a different loan, the tuition fees loan. This money is paid directly to your university by Student Finance. It currently costs up to £9,250 a year to attend university in the UK, so this is how much you can borrow for each year of your degree.
This money will be paid to your university to cover the costs of tuition in instalments throughout the year, rather than being sent directly to your bank account. This means that once you’ve applied for student finance, you won’t have to worry about paying your tuition fees for uni, as this will be organised for you by student finance.
How do loan repayments work?
Luckily paying back your student loan is super easy, and won’t require much effort from yourself.
Depending on which Loan Plan you’re on, you may be paying from the time your income is over £25,000 a year (if you’re on a plan 5 student loan). If you’re on a plan 2 student loan for example, you’ll need to earn £27,295 before having to pay back any of your student loan.
Your student loan payments will be deducted from your monthly salary before you receive it, in the same way that Tax and National Insurance are deducted.
You’ll be able to keep track of how much you’re paying back by checking your payslips and logging into your Student Finance account to keep track of how much you’ve paid and still have to pay.
The amount that you pay back each month will be relative to how much you are earning. So if you are only just earning above the threshold, you can expect to only pay around £10 a month, depending on your income. However, if you have a higher income these payments will be much higher and will increase whenever your income increases.
If your income decreases to below the threshold, or you are temporarily out of work, you will stop paying back your student loan until you are earning £27,274 per year again. So, you don’t need to worry about paying back your student loan if you can’t afford to.
You can also make additional repayments at any time you like online by logging into your Student Finance account.
Best student bank account overdrafts in 2023
An overdraft can be really helpful if your money isn’t stretching and you just need a bit of extra cash in between student loan instalments.
While most bank accounts will charge interest if you go into an overdraft, there are many student bank accounts that will offer an arranged student overdraft which is interest-free and will often allow you an overdraft limit of between £1000-2000.
Some of the best student bank accounts that offer a student overdraft to check out are Santander, Natwest, HSBC, Lloyds and Barclays all of which offer large arranged student overdrafts that are interest-free and won’t charge you for going into your overdraft.
Here are the best student bank accounts that come with freebies.
Did student loan repayments change in 2023?
Every year the threshold of when you’re eligible to start paying back your student loan normally changes. This is to accommodate for inflation and the rising costs of living in the UK.
Alternatives to student loans
Student loans are the best way to cover the cost of university, but in some rare cases you may not be eligible for one or you may feel like you don’t feel comfortable taking out a loan. While taking out a student loan isn’t a debt that will stick with you for life as it will be written off and you won’t have to pay it back until you’re earning a certain amount of money, you may still want to look into alternatives. On the other hand, you may be taking out a student loan but want an additional income source if you feel like your loan isn’t going to cover all of your living costs.
- Grants- depending on whether you live in Wales, Scotland or Northern Ireland you may be eligible for grants, which is a payment from the government that you won’t need to pay back
- Overdrafts- make sure to open a student bank account with an overdraft, to help give you access to extra money if you’re running low on cash for emergencies
- Part-time jobs- a part-time job can help to cover the costs of your rent and day-to-day expenses
- Scholarships and bursaries- you may be eligible for additional funding or support, which is definitely something to look into
How to contact student finance England
If you have any issues with your student loan, you should contact student finance as soon as possible to try and rectify the situation. You can contact student finance on their website, and give them a call or email to try and work out what the issue is.
You can find a complete list of the SFE contact details on the government website.
Should I pay off my student loan?
Once you’ve graduated and you’re earning over the threshold needed to start paying back your student loan, you will start paying it back in monthly instalments.
However, some students find themselves in a situation where they may be able to afford to pay back more than the monthly instalments. If you do find yourself in a comfortable financial situation after you’ve graduated, you can choose to make direct payments to student finance to pay off your student loan at any time, as well as the monthly instalments.
While the idea of being debt-free is very appealing and the interest on student loans is constantly rising making the total amount of debt higher, whether you want to pay it all off is entirely up to you. Your student loan will eventually be wiped if you don’t manage to pay it all off, so it may feel like you’re just putting money towards something that you won’t eventually need to pay off anyway.
When do student loans get written off?
Luckily in the UK student loan debt is not something that will be stuck with you for life.
If you’re on a plan 2 loan, after 30 years your student loan will be wiped, so if you have not paid it all off by then that’s it, it’s gone! You will have 30 years from after you graduate to pay back your student loans, which you’ll do monthly once you’re earning above the threshold. The chances are due to the amount of interest added to your student loans and the small amount you have to pay each month, you won’t ever pay off your loan entirely but this doesn’t matter as anything you don’t pay within 30 years will be wiped.
Can you apply for student finance before accepting a place?
Yes, you can apply for student finance for the upcoming academic year as soon as you decide that you want to go to university.
As you need to fill out a detailed application, it’s best to get this out of the way so you won’t have to worry about it just before you’re due to start university.
Can you be refused student finance?
Yes, you can be refused but this is quite rare and will depend on certain circumstances. Your nationality or residency status, age, whether you’ve taken out a student loan before and your university and course can all depend on whether or not you’re actually eligible for a student loan. You can find out more about student finance eligibility on the government website.