How do UK student loans work?

How do UK student loans work?
How do UK student loans work?

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Students hoping to start university in September are being urged to apply for their loans before Friday if they want to guarantee they will have the money by the start of term.

It is possible to apply later, but the Student Loans Company says that could lead to delays.

Changes to student finance rules in England last year mean students are now paying off their loans for longer.

How do student loans work?

The details depend on where you live in the UK, but student loans are typically made up of two elements:

Most people are entitled to the tuition fee element, which is equal to the annual cost of your course up to £9,250 per year.

The maintenance loan is intended to cover accommodation, food, books and any equipment you need. 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 parents’ financial situation is not taken into consideration.

The Student Loans Company says graduates in England leave university with average debts of £44,940.

How can I find out how much I can borrow?

The amount of maintenance help available varies across the UK.

This year, students in England will be able to borrow up to £10,227 a year for a maintenance loan if living in the UK, outside London and away from their parents. This increases to £13,348 in London.

In Scotland, the maximum annual maintenance loan is £9,400 for under-25s. For students living away from home in the UK outside of London, it is £12,150 in Wales and £6,776 in Northern Ireland.

When and how to apply for student finance in 2024

You can apply for student finance if you want to start university this year.

You do not need a confirmed place at university to apply and, if your plans change, you can cancel or change your application before the start of your course.

The Student Loans Company urges prospective students to apply by 17 May to “guarantee their student finance will be in place for the start of the academic year”.

However, you can still apply after the first day of the academic year for your course.

The application process is different depending on where you live:

Student typing on a laptop in student accommodationStudent typing on a laptop in student accommodation

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How do I get the money?

The tuition fees part is paid directly to your university or education provider.

The maintenance loan is paid directly to your bank account in instalments.

These are at the start of each term in England, Wales and Northern Ireland, and monthly in Scotland.

How much interest will I be charged?

You are charged interest on the loan from the day you take it out, but the amount varies across the UK.

It is important to understand that the terms and conditions can change after you have borrowed the money – any interest-rate rises will apply to all student loans not just new applications.

For students starting courses this year in England, the interest rate will normally be set at the retail price index (RPI) measure of inflation. It is currently capped at 7.8%.

For courses in:

The amount graduates pay back will depend on how much they earn.

When do I have to start paying back my student loan?

You do not have to start repaying your loan until you earn a certain amount of money after graduation.

The threshold for students starting university in England this year will be £25,000.

In Wales it will be £27,295, in Scotland £31,395 and in Northern Ireland £24,990.

You do not repay anything if you earn less than the threshold.

The earliest you will start repaying is the April after you leave your course.

Payments are made automatically through the tax system.

You generally repay 9% of the amount you earn over the threshold.

When are student loans written off?

In England, anyone starting university this year will pay back their loan for 40 years before it is written off, regardless of how much is owed – a decade longer than last year.

In Wales and Scotland it is 30 years, and in Northern Ireland it is 25 years.

You still have to repay your student loan if you leave your course early.

Some people may opt to make extra repayments to clear some or all of their loan early – there is no penalty for doing so.