Student loans: How do they work?

OK, you’ve got the grades to get to into university – brilliant. Now you just need to work out how to cover your costs while you’re there.


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With the average degree course costing around more than £50,000 according to some estimates, student loans are pretty much essential if you’re starting higher education this September or October. They can help you pay for both your tuition fees and living costs.

If you haven’t yet applied for your loans, you’ll need to get your skates on as you’ve already missed the deadline which guarantees your funding will be in place for the start of term.


Here, we explain everything you need to know about student loans, and how to apply….

How much can I borrow?

The total amount you can get from student loans depends on where you will be living, and on your family’s income.

There are two different kinds of student loan. The first is the maintenance loan, which is there to help cover your living costs, such as your accommodation, food and so on. You get more if you live away from home, as you’ll have to pay for rent.

So, the maximum you can get from the maintenance loan this year is £5,500 if you live away from home and are starting university this September. This rises to £7,765 if you’re living away from home in London, because living expenses in the capital are so much higher.

If you live at home while you are a student, the maximum maintenance loan you can get is £4,375.

Part of the maintenance loan (35%) is means-tested, so you might not get as much as the maximum if you have a higher family income.

Isn’t there a maintenance grant as well as the maintenance loan?

Yes, and the good news is that, if you are entitled to this, it doesn’t have to be repaid. The maximum grant available for 2013/2014 is £3,354, available to full-time higher education students with a household income of £25,000 or under.

You get a partial grant if your household income is between £25,001 and £42,611. If your family income is higher than the £42,611 threshold, you won’t qualify for the maintenance grant.

What about tuition fees?

As well as the maintenance loan, there is the tuition fees loan, which – as you might have guessed – covers the cost of your tuition fees. This must be paid back when your course finishes.

You can borrow up to £9,000 a year to cover the cost of fees, and the money is paid direct to your university.

When is the deadline to apply for loans?

You needed to apply by May 31 this year if you are in England and wanted to get your loans in time for the start of the autumn term. In Scotland, students had until 30 June. For Welsh students the deadline was April 19, for Northern Irish students it was April 12.

If you’ve missed these deadlines you can still apply for your loans now, but you might not have the cash until a few weeks after term has started.

How do I apply?

You can apply for your student loans online here: You should get a loan declaration in the post around six weeks after you’ve submitted your application which will confirm how much you’ll get.

When do I have to repay my student loans?

You have to start paying back any loans as well as any interest the April after you finish your university course, but only if you are earning more than £21,000 a year. So, if you never earn more than this, you’ll never have to pay them back.

You must repay 9% of everything you earn above the £21,000 threshold each year. So, for example, if you earn £25,000 a year, this is £4,000 above the £21,000 threshold. That means you’d have to repay 9% of £4,000 that year, which comes to £360.

What about interest?

Interest is added to everything you owe. While you are studying this is usually charged at the same rate as the Retail Prices Index (RPI) in March that year plus another 3%. The RPI rate in March this year was 3.3% so interest charged on student loans in 2013/14 is expected to be 6.3%, which is less than 2012/13's figure of 6.6%. This will be confirmed at the end of August.

After you finish studying, you continue to be charged interest on what you owe. If you are earning less than £21,000, interest will be at the same rate as RPI inflation. The more you earn, the more interest you will pay. The rate rises slowly from RPI to a maximum of RPI plus 3% once you earn £41,000 or more.

How do I make repayments?

You don’t have to worry about sending off payments every month as, once you are working, your student loan repayments are taken directly from your salary before you get it.

Will my loans ever be wiped off?

Yes, any loan not repaid after 30 years is wiped off, so if you never earn about £21,000 during this time you won’t have to pay back anything at all.

You can find out more about how to repay student loans at

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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