Over one million students take out loans from the Student Loans Company every year. For many people, further education without a Student Loan simply wouldn’t be possible.
But how much can you borrow and when will you have to start repaying the loan? How much of your student loan will you have to pay back each month? Can you borrow money to pay the tuition fees of your course? Will things change as a result of the tuition fees review?
Many students aren’t 100% clear on some of these questions - so we've put together this up to date and handy guide to all of the main points which might affect your decisions on student loans.
Providing you are a student in full time education, you can take out student loans to cover your university or college tuition fee costs as well as some general day to day living costs.
Universities and colleges in England, Wales and Northern Ireland are currently allowed to charge up to £3,375 for the 2011/12 academic year. In Scotland, tuition fees are generally £1,820, with the exception of Medicine which costs £2,895.
After the recent shake up of tuition fees that has been all over the news, institutes in the public sector will be allowed to charge up to £9,000 per year from September 2012.
You can apply to the Student Loans Company for a Tuition Fee Loan to cover all of these costs and the money will be paid directly to your college or university. From September 2012, part time students will be allowed to apply for a Tuition Fee Loan of up to £6,750 if their course is the equivalent of at least 25% of a full time course.
In addition, full time students can also apply for a Maintenance Loan to cover some of the general living costs they will incur during their time of study. This amount of this loan is dependent on a few factors such as your household income, whereabouts you are studying and what year of the course you are in.
The maximum Maintenance Loan for the 2011/12 academic year is £6,928 if you are studying in London and not living with your family. Outside of London, the maximum the Student Loan Company will lend you falls to £4,950. If you are living in your family home while you are studying then you will only be able to borrow a maximum of £3,838 towards your everyday expenses.
All full-time students are entitled to at least 72% of the maximum Maintenance Loan figures, but the remaining 28% is dependent on household income.
In September 2012, the maximum figures for a Maintenance Loan will rise to:
At the moment, you don’t have to pay back a penny of your Student Loan until after you complete your course – and, even then, it is dependent on how much you are earning.
If you have already started your course or will start in September 2011, then you won’t have to pay back any of your Student Loan until you are earning at least £15,000.
For the academic year starting in September 2012, however, that repayment threshold figure will rise to £21,000 – but the date of repayment begins 3 years after the start of your course.
So, that means that if your course is 4 or more years then you could be liable to start repayment of your loans while you are still studying. The payment threshold still applies though, so it is irrelevant unless you are lucky enough to be earning over £21,000 while still completing your course.
If you are earning above those thresholds then you will start to repay your Student Loans in the April after you graduate (or leave your course).
At the moment the current rate of interest charged on student loans is linked to the interest charged by banks in the high street. The actual figure is decided by which is the lowest of two interest figures between the Retail Price Index and 1% above the highest base rate of a nominated group of banks.
From September 2012 until April 2016, interest will be charged at 3% above the Retail Price Index.
After 2016, the interest situation gets a little more complicated and is linked to your scale of pay. If you earn less than £21,000 then interest will be at the same rate as inflation. Anyone earning over £41,000 will be charged interest at the rate of inflation plus 3%. People earning between those figures will be charged inflation plus a stepped rate between 0% and 3%.
Once you are eligible to start repayment of your student loans, you will pay a monthly amount which is calculated at 9% of any earnings above the payment threshold. So for example, if you were earning £5,000 more than the payment threshold, then you would pay back £450 a year – or around £38 a month.
Student Loan repayments are automatically deducted from your salary by your employer – or, if you are self-employed, then you repay them via a self-assessed tax return.
You can also choose to pay back more than the minimum payment if you would like to settle the debt at an earlier date.
You can check the find out more about student loans and the outstanding amount of your student loans at any time by logging on to your account on the Student Loans Company website