Student loans and finances: The definitive guide

Student loans and finances: The definitive guide to everything you need to know about tuition fees, grants, bursaries and maintenance

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University is expensive. Students from England pay tuition fees of £9,250 per year of study, or £27,750 for a typical three-year degree.

You will also have to cover living costs and rent if you live away from home, so the total cost for a degree may come in at around £60,000.

How on earth can anyone afford this, you may wonder. That’s where loans and grants come in. Here’s everything you need to know about student finance.

Student finance guide 

Tuition fee loan

Undergraduates from England pay annual tuition fees of £9,250, meaning a total of £27,750 for a three-year course (File image)

Undergraduates from England pay annual tuition fees of £9,250, meaning a total of £27,750 for a three-year course. In Wales, tuition fees are £9,000 per year for students from Wales, and in Northern Ireland there is a reduced rate of £4,710 a year for those from Northern Ireland. Scottish nationals pay no tuition fees if they study in Scotland. If you are from England, you pay £9,250 regardless of which country you study in.

You can pay these fees yourself or choose to cover them using a tuition fee loan. Everyone, regardless of their family financial circumstances, can apply for a loan to cover tuition fees. The tuition fee loan goes straight to the university so students do not handle the money directly.

Students must first apply online for a loan and must reapply each year for the next year’s study before the end of June. The application process is different for each country. The long-term costs of higher education have just risen due to the new Plan 5 student loans, which kicked in this month for students from England who are about to begin their courses at UK universities. Graduates will start repaying sooner and continue paying for longer depending on their salaries.

The main change to the current system is that any outstanding loan will be wiped out after 40 years, rather than the current 30 years. At the same time, the earnings threshold for repaying student loans is now £25,000, down from £27,295 for students who started before September 2023. The changes mean more graduates will pay back their loans in full – with 73 per cent likely to pay off their debt compared to the current 44 per cent, according to the Institute for Fiscal Studies. Keep reading for more information on repayments.

Maintenance loans and grants

Students can apply for a maintenance loan to help cover expenses such as rent, bills and course materials. The money is paid straight into their bank account, three times a year (except in Scotland where it’s paid monthly). How much can be borrowed differs between the four countries of the United Kingdom and takes into account parents’ income.

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In England, the maintenance loan for students living away from home is between £4,651 and £9,978, rising to between £6,485 and £13,022 for those studying in London. Those living at home can receive up to £8,400. The assumption is that a student who does not receive the full loan will receive parental financial support to top them up, although many parents – and students – complain this is unfair if that is not the case. More than half of students now also work part time to help meet some of the costs of studying.

Many also say the loan does not go far enough to cover living costs. The average rent for students is £535 a month, according to website Save the Student, while the average maintenance loan is just £485. You can find accommodation prices in our individual university profiles.

Students from Wales can draw on a combination of a loan and a maintenance grant available totalling £11,720 (£14,635 if studying in London) to cover living costs. The grant is not repaid. The ratio of loan to grant depends on parental income. If the family household income is under £18,370, students living away from home receive £3,620 through the loan and £8,100 through a grant. Those with a household income above £59,200 will only get a grant of £1,000, with the remaining £10,720 covered by a loan.

Students can apply for a maintenance loan to help cover expenses such as rent, bills and course materials. The money is paid straight into their bank account, three times a year (except in Scotland where it’s paid monthly) – File image

Students from Scotland can get up to £6,000 from a loan if their parents’ income is above £34,000 a year. Where the household income is below £34,000, they can get a further £1,000 through a loan and up to £2,000 through a bursary that is not repaid.

Students from Northern Ireland are eligible for a maximum maintenance loan of £6,776 for those living away from home and up to £9,492 for those studying in London. For Northern Ireland nationals, a maintenance grant of £3,475 is available for students with a household income of less than £19,203, while a partial grant is available for incomes up to £41,065. Maintenance grants were scrapped in England in 2016.

The Disabled Students’ Allowance gives extra financial help of up to £26,291 a year to those with a disability, which is not paid back.

Bursaries

There is likely to be a cash shortfall between your living expenses and your maintenance loan, says admissions service Ucas. It’s worth looking at what extra financial support is available through bursaries and scholarships. Unlike loans, they are not repaid.

They are most commonly given to students based on financial need, but some are awarded for academic, sporting or musical achievement. Search www.thescholarshiphub.org.uk for different scholarships, bursaries and grants available to students in the UK. For example, Liverpool John Moores’ Vice Chancellor’s Scholarship gives £5,000 a year to five students with a household income below £25,000.

There is also extra financial support from universities in the form of hardship funds. Contact the student services department at your university if you are a single parent, from a low-income family or have previously been in care. The amount is decided by your university, and is usually given as a grant.

Details of the main bursaries and scholarships at each university can be found on their profile pages in the Daily Mail University Guide.

Repaying student loans

Unlike other debts, a tuition fee loan is wiped after 40 years or if you die before then. You will not have to worry about the debt being passed on to your children or other family.

Students in England beginning courses this month are looking at total borrowing of around £60,000 for a three-year course, taking into account tuition fee loans and maintenance loans to cover living costs.

But student loans are different from conventional loans. You only begin to repay them when you earn more than £25,000 a year (on Plan 5). Repayments are 9 per cent of your salary above £25,000, taken via payroll if you are employed and through self-assessment if self-employed. If you don’t earn above this amount, you’ll never pay anything.

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Repayments begin the April after you finish or leave your course, but only if you’re earning above £25,000 a year. The £25,000 threshold is frozen until 2027, when it should rise in line with inflation. For current students who started their course before September 2023, repayments start once earnings are above £27,295.

The rate at which you pay interest on a student loan is also changing. From September 2023, the amount you owe will rise annually by the Retail Prices Index (RPI) measure of inflation. Currently, the interest is up to RPI plus 3 per cent.

Unlike other debts, the loan is wiped after 40 years or if you die before then. You will not have to worry about the debt being passed on to your children or other family.

As your salary rises, so the repayments begin to increase. On a salary of £24,000, no repayments are due, but at £27,000 repayments are calculated at 9 per cent on the £2,000 that is above the £25,000 repayment threshold. This means making a repayment of £180 annually, or £15 a month.

At a salary of £35,000, annual repayments would be £900 (9 per cent of the £10,000 of earnings that are above the £25,000 threshold) or £75 a month.

Earnings of £45,000 a year would trigger repayments of £1,800 a year or £150 a month.

At £55,000, this would rise to £2,700 a year, or £225 a month.

At £65,000, repayments would amount to £3,600 a year, or £300 a month.

Student loans are different from conventional loans. You only begin to repay them when you earn more than £25,000 a year on Plan 5 (File image)

And at £75,000, repayments of £4,500 would be made in a year, or £375 a month.

Even on a salary of £75,000, it will take many years for your student loan to be cleared, with a significant proportion of repayments just covering the interest incurred on the loan.

Interest starts to accrue from the moment the loan is made while you are studying. With recent high inflation (and corresponding high interest rates on student loans), very few recent graduates will have made payments large enough in the past year to bring about a net reduction in their student loan.

While outstanding student loans do not impact eligibility for other finance, such as mortgages, most graduates should budget for repaying their university debts for the long term.

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