How Student Loans work: Student Finance Explained 

Most people working towards an undergraduate degree will use the money they get from student finance to fund their studies. You’ll need to be enrolled in a higher education course after college to be eligible for it.


The main types of student finance are :


Tuition fee loan. This is paid directly to your university to cover the cost of your tuition fees.

Maintenance loan. This is paid into your bank account to cover the cost of your living expenses like rent during your studies.

There are separate student finance groups for England, Wales, Scotland, Northern Ireland, Jersey, Guernsey and the Isle Of Man. They each have separate criteria with regards to how much funding applicants are eligible for depending on their circumstances. The body you apply to depends on your residency, not where you’re planning on studying.  

Each body in their counterpart will set a deadline for applicants to ensure their funding arrives before the start of the academic year. Although it’s possible to apply for funding up to nine months after your undergraduate or postgraduate course has started. 


So am I eligible for student finance ? 


To be eligible for student finance, you’ll need to have been accepted to study one of the qualifications below:


  • A first degree, for example BA, BSc or BEd
  • A Foundation Degree
  • A Certificate of Higher Education
  • A Diploma of Higher Education (DipHE)
  • A Higher National Certificate (HNC)
  • A Higher National Diploma (HND)
  • An Initial Teacher Training course
  • An integrated master’s degree
  • A pre-registration postgraduate healthcare course


If you’re studying or planning to study part-time, you could still be eligible for some funding, provided your “course intensity” is at 25% or higher.


You’ll usually only receive funding for your first higher education course, even if your previous course was funded. However, there are some exceptions to this rule, for instance, if you change course or drop out and start again, you may be eligible for a limited amount of funding. The same applies if you’re looking to “top up” an HMC, HND or Foundation Degree into an Honours degree for yourself. Funding may also be available if you hold a higher education qualification and are looking to begin a part-time Honours degree in something like, engineering, technology, computer science or healthcare.


UK nationals or those who withhold a  “settled status”, or have been living in the UK for at least three years, are eligible to apply. Non-UK nationals aged under 18 who have lived in the country for at least seven years could also be eligible for funding. Non-UK nationals who  are over 18 can apply if they’ve lived in the country for at least half of their life, or more than 20 years. Some EU nationals and those in the UK under various refugee statuses may also be eligible to apply for this funding. 


Tuition fees: How much will they cost you ?


If you successfully apply for student finance, you’ll be granted 100% of your tuition fees per term. You can get up to £9,250 per term if you’re studying in England, Scotland or Northern Ireland, or up to £9,000 per year if you’re studying in Wales. 


Eligible Scottish students studying in Scotland actually pay no tuition fees. The costs are completely covered by the Student Awards Agency for Scotland (SAAS).


Northern Irish students studying in Northern Ireland will pay a maximum of about £4,160 per semester and tuition fees across the UK vary for international students.


Maintenance loans: How much do I get ?


Maintenance loans are normally transferred into your bank account in three segments per year, before the start of each new term. 


To be eligible, you’ll need to be studying for one of these below:


  • A first degree, for example BA, BSc or BEd
  • An Initial Teacher Training course (degree level or above)
  • An integrated master’s degree
  • Some dental qualifications


In most cases, you’ll need to be living away from your hometown to qualify, also the amount you get depends on your household income of your parents and where you’re studying.


If you’re applying to Student Finance England, you’ll receive up to a total of  £8,944 per year (or £11,672 if studying in London).

If you’re applying to the Student Awards Agency for Scotland, you’ll receive up to £5,850 per year.

If you’re applying to Student Finance Wales, you’ll receive an amount of up to £9,225 per annum (or £11,530 if studying in London). Some of this funding may come in the form of a non-repayable grant, worth at least £1,000 which are typically awarded to students from lower-income households or backgrounds. 


If you’re applying to Student Finance Northern Ireland, you’ll receive an amount of up to £4,840 (or £6,780 if you’re studying in London).


Student Loan Repayment


If you’re Scottish, Northern Irish or started university before 2012, you’re put on a Plan 1 loan. Students must repay these loans at a rate of 9% of everything they earn if they’re receiving  above £18,330 from their job. Therefore, if you’re earning £30,000 a year, you’ll pay 9% of £11,670, which is £1,050,30.


If you’re an English or Welsh student and started university in 2012 or later, you’re put on a Plan 2 loan. Students then must repay these loans at a rate of 9% of everything they earn when they make over £25,000 each year. So, if you’re earning around £30,000 a year, you’ll pay 9% of £5,000, which is £450.


Student loan repayments are deducted automatically via PAYE, or self-assessment if you’re working as self-employed. If you’re earning less than these current thresholds, you’ll not be obligated to make no repayments. If the loan isn’t fully repaid after 30 years, it’ll be written off completely. (For Plan 1 loans, it might be written off after 25 years, or when you turn 50, depending on the start date of your degree or course).


Understanding Student Loan Interest


For Plan 1 loans, interest is charged at the rate of RPI (Retail Price Index)  inflation. 

For Plan 2 loans, the interest rate depends on the earnings you make per annum. If you are earning less than £25,000 a year, you’ll be charged inflation at RPI. If you earn £45,000 or more a year, you’ll be charged inflation at RPI + 3% interest. When you earn in between these figures, it gets complicated, as the percentage above RPI rises gradually between 0% and 3%. So if you earn £35,000 (half-way between the two), you’ll pay RPI + 1.5% interest. If you earn £38,333 (two-thirds of the way), you’ll pay RPI + 2% interest.


Your interest rate is calculated each time and will change in September of every year. It won’t change the amount you pay back per year, only the amount of time it takes to clear the debt that you owe. 


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