The rules for student loans are changing for many students who will take out loans to go to university this year. Here’s what you need to know.
How Do Student Loans Work?
Student loans in the UK are typically made up of two elements:
- A loan for tuition fees
- A maintenance loan to cover living costs
Most people are entitled to the tuition fee element, equal to the annual cost of your course up to £9,250 per year, capped until the academic year 2024-25.
The maintenance loan will cover accommodation, food, books, and necessary equipment. It is means-tested, so the amount you get depends on your family’s household income.
You might get extra money if you are disabled or have children.
If you are under 25 and have no contact with your parents, you might be able to apply as an “estranged student”. This means your parent’s financial situation is not taken into consideration.
How Can I Find Out How Much I Can Borrow?
The amount of maintenance help available varies across the UK.
- Students from England can use the loan calculator on the Student Finance England website.
- Students from Wales can go to Student Finance Wales
- Students from Scotland can go to the Student Awards Agency Scotland
- Students from Northern Ireland can go to Student Finance Northern Ireland
When and How Do I Apply?
It is not too late to apply for student finance if you want to start university this year, even though the official deadlines have passed.
It means you might receive some or all of your money later.
You do not need a confirmed place at university to apply; if your plans change, you can cancel or change your application before the start of your course.
The process is different depending on where you live:
- The Student Loans Company processes all applications for students in England and Wales
- Students in Scotland apply through the Students Awards Agency Scotland
- Students from Northern Ireland apply through Student Finance Northern Ireland.
How Do I Get The Money?
Student Finance pays The tuition fees of your loan directly to your university or college. You do not need to worry about it.
The maintenance loan is paid into your bank account at the start of each term. You must register with your university and confirm your attendance before you can get your first payment.
How Do I Repay The Loan?
You do not need to repay anything until you earn over a certain amount. The repayment threshold varies depending on where you live and when you started your course.
For example, if you are from England and started your course after 2012, you will only start repaying when you earn over £27,295 a year. If you are from Scotland and started your course before 2012, you will begin to repay when you reach over £19,895 a year.
You repay each month based on a percentage of your income above the threshold. For example, if you are from England and earn £30,000 a year, you will repay 9% of £2,705, which is £243.45 a year or £20.29 a month.
Your repayments will be automatically deducted from your salary by your employer. If you are self-employed, you must declare your income and make repayments through your tax return.
You will only repay for 30 years after you become eligible to repay. After that, any remaining debt will be written off.
What If I Want To Pay Off My Loan Early?
You can make voluntary payments anytime to pay off your loan faster. However, this may not save you money in the long run, as you will only repay what you owe plus interest.
The interest rate on your loan depends on how much you earn and when you started your course. It can vary from RPI (Retail Price Index) inflation to RPI plus 3%.
You can check how much interest you pay and how much you owe on the Student Loans Company website.
