Student Finance: What is a Student Loan?

A student loan is an easy, low-interest way to fund your studies, but the application and repayment process can be daunting. Find out how the student loans process works, the maximum student loan values available, how to apply plus repayment information.

Student Loans: How Student Loans Work?

You’ll need to apply for your loan to an award authority via an application form or online. For England and Wales, the authority is the Local Education Authority, while Scotland’s is the Student Awards Agency for Scotland and Northern Ireland answers to the Education and Library Board.

Whoever is supporting you financially – usually a parent - will need to fill in supporting financial documents as a percentage of a student loan is means-tested, which means that the amount of money you can borrow depends on individual financial circumstances.

Once your application has been assessed, the Student Loans Company will pay a third of the money into your bank account once you have registered at your university and have started attending your course. The rest will be paid in instalments at the beginning of each of the remaining two academic terms. Loans need to be re-applied for each year.

Student Loans: How To Apply

To be entitled to an ’income contingent loan’, you must be a UK resident, under the age of 50 (or under-54 and intending to go back to work afterwards), attending a full-time higher education course.

The amount you’ll be able to borrow will depend on where you will be studying and whether you will be staying at home or not, and a percentage of it is means tested – dependant on your financial circumstances. So if you’re living at home while you attend your course, the maximum loan you could currently be awarded is £3,580 a year, but students living away from home could borrow up to £4,625 and those staying away from home and studying in London, where expenses are higher, can borrow up to £6,475, although of course there are exceptions to these rules based on individual circumstances.

You can apply online or through an application form well before the start of the course. You’ll then be informed of the amount you will be loaned, and given a payment schedule – you should take this with you when you register at your college or university.

Student Finance: Find out more about your options for funding University by reading about Student Grants

Student Loans: Repayment Options of Student Loans

Interest rates for the loan are much lower than average loans and are adjusted every year in line with the Retail Prices Index (currently, the rate is set at 3.8%), and interest starts from when the loan is paid into your account. Grants, or support towards tuition fees, do not need to be repaid.

You won’t need to repay your loan until the April after you’ve finished your course, and even then until you are earning over a set minimum threshold, currently set at £15 000. After that time, your employer collects your repayment straight from your salary every month to HM Revenue and Customs, calculated at 9% of the amount you’re earning over and above the £15 000 threshold, until the full loan amount has been paid off. You’ll be able to find information about your loan repayments on your pay slips or P60.

If you would like to pay off your loan more quickly before this happens, you are free to do so. If, on the other hand, your salary falls beneath the threshold, your payments will immediately be stopped.

Student Finance: Student Loan rates and availability differ year-on-year please visit the Student Loans Company website for up-to-the-date information on Student Loans: www.slc.co.uk

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