Student loans are a widely-used method of financing higher education in the United Kingdom. With tuition fees often exceeding tens of thousands of pounds, funding one’s studies without the help of a student loan is becoming increasingly difficult. Here’s everything you need to know about student loans in the UK.
What is a student loan?
In essence, a student loan is a sum of money that is lent to a student to help finance their studies. The loan is repaid after the student has graduated and begins earning a certain amount of money per year. Interest is charged on the loan, but the rates are relatively low compared to other types of loans.
Who is eligible for a student loan?
To be eligible for a student loan in the UK, you must be a UK citizen or have “settled status” in the UK (meaning that you are not subject to immigration controls). You must also be studying at an eligible university or college, and your course must be at least 25% of the intensity of a full-time course. You’ll need to meet some other criteria too, such as not having already graduated with a degree and not already having received a certain amount of funding for studies.
How much can you borrow?
The amount you can borrow will depend on several factors. Firstly, the tuition fees of your course will determine the maximum amount you can borrow. For courses beginning in 2021/2022, the maximum amount is £9,250 per year in most cases. Secondly, your living costs will be taken into account – this includes things like accommodation, food, and travel, among other things. In total, you can usually borrow up to £9,488 per year for living costs if you’re studying outside of London, or up to £12,382 per year if you’re studying in London.
How is the loan repaid?
Student loans in the UK are repaid through the tax system. Once you begin earning over a certain amount (which is currently £27,295 per year), you will start making repayments. The amount you repay each month will be a percentage of your income – currently, this is 9% of anything you earn over the threshold. Interest will also be added to your loan, although the rate you are charged will depend on your income.
What happens if you can’t repay the loan?
If you’re struggling to repay your student loan, there are several things you can do. Firstly, you can apply for a repayment holiday – this will give you a break from making payments for up to 12 months. If you’re still struggling after this, you can apply for a “temporary reduction of income”, which will lower your monthly payments for up to 12 months. If you still can’t make the payments after this, the loan will eventually be written off after a certain amount of time (currently 30 years).
Student loans are a crucial part of the UK’s higher education system. Without them, many students would struggle to fund their studies and would miss out on the opportunities that higher education can provide. Hopefully, this guide has given you a better understanding of the ins and outs of student loans in the UK!