Student Loans


Student loans: How do they work, what can I borrow and when do I pay it back? – BBC News


Student loans: How do they work, what can I borrow and when do I pay it back?

Students in the UK will be heading to college or university this autumn amid a cost-of-living crisis.

Prices for energy, food, rent and other essentials are all increasing.

What financial support is available?

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:

  • a loan for tuition fees
  • maintenance loan to cover living costs

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, capped until academic year 2024/2025.

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’re 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.

How can I find out how much I can borrow?

The amount of maintenance help available varies across the UK.

When and how do I apply?

Although the main deadlines for new and returning students have already passed, students can still apply for help for the 2022/23 academic year.

The process is different depending on where you live:

The Student Loans Company says applications for both elements of the loan can still be made up to nine months into the first year of your course.

Student typing on a laptop in student accomodationIMAGE SOURCE,GETTY IMAGES

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, and if you applied before the deadline, you should have the money before your course starts.

How much interest will I be charged?

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

It’s important to understand that the terms and conditions can change after you have borrowed the money.

In June it was announced that the rate of interest will be capped at 7.3% for new students who start in September 2022. It had been expected to jump to 12% because inflation has risen so much.

For courses in Scotlandthe rate is currently 1.5%, For courses in Northern Irelandthe rate is also currently 1.5%.

Once you have finished studying, the interest rate you’re charged depends on how much money you earn.

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

Payments are made automatically through the tax system.

University students graduating at Bath AbbeyIMAGE SOURCE,GETTY IMAGES

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

However, the amount you can earn before you have to start repaying differs across the UK.

In England and Wales, the threshold is currently £27,295, but will will drop to £25,000 in September 2023.

In Scotland the threshold is already £25,000, and in Northern Ireland it’s £20,000.

You don’t repay anything if you earn less than the threshold.

When are student loans written off?

Under the current system, student loans are typically written off after 30 years, however much is still owed

However, the government plans to increase this period to 40 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’s no penalty for doing so.

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