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How do student loans work?

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This fall, students in the UK are arriving at college or university in the midst of a cost of living crisis.

Prices of energy, food, rent and other necessities are rising.

What financial support is available?

How do student loans work?
The details depend on where you live in the UK, but student loans usually consist of two elements.

Tuition fee loans
A maintenance loan to cover living costs
Most people are entitled to the tuition fee element, which is equivalent to the annual cost of your course, up to £9,250 per year, capped at the academic year 2024/2025.

The Maintenance Loan is designed to pay for accommodation, food, books and any equipment you need. It is means-tested, so the amount you receive depends on your family’s household income.

If you have a disability or have children, you may be able to get extra money.

If you are under 25 years old and have no contact with your parents, you may be able to apply as an “alienated student. This means that your parents’ financial situation is not taken into account.

How do I know how much I can borrow?
The amount of maintenance help available varies across the UK.

Students from England can use the loan calculator on the Student Finance England website
Students from Wales can go to Student Finance Wales
Students from Scotland can go to Scottish Student Awards
Students from Northern Ireland can go to the Northern Ireland Student Finance Centre
When and how do I apply?
Although the main deadlines for new and returning students have passed, students can still apply for help for the 2022/23 academic year.

The process varies depending on where you live: the

The Student Loans Company handles all applications for students in England and Wales
Students from Scotland apply through the Scottish Student Awards Agency
Students from Northern Ireland apply through the Northern Ireland Student Finance Centre.
The Student Loans Company says you can still apply for both parts of the loan during the first nine months of your first year of your course.

How do I get the money?
The tuition fee component is paid directly to your university or educational institution.

The maintenance loan is paid directly into your bank account. If you apply before the deadline, you should get the money before your course starts.

How much interest will I be charged?
You will be charged interest on your loan from the date you take it out, but the amount varies across the UK.

It’s important to understand that terms and conditions may change after you borrow money – any interest rate increases will apply to all student loans, not just new applications.

In England and Wales, the interest rate for the duration of your studies is currently calculated by adding 3% to the Retail Price Index (RPI), which measures inflation.

From December 2022 to March 2023, the interest rate is capped at 6.5%, up from 6.3% in September.

From September 2023, the interest rate for new students should be fixed at RPI.

For the following courses.

Scotland, the tax rate is 3.25%
Northern Ireland, 4%
The amount repaid by graduates will depend on their income.

Cost of living crisis: concerns about the impact on students
What is inflation and why is the cost of living rising?
When do I have to start repaying my student loan?
You do not have to start repaying your loan until you have earned a certain amount of money after graduation.

Payments are made automatically through the tax system.

You will typically repay 9% of your income above the threshold.

However, the amount you can earn before you have to start repaying varies in the UK.

In England and Wales, the threshold is currently £27,295, but will drop to £25,000 in September 2023.

In Scotland, the threshold is already £25,000 and in Northern Ireland it is £20,000.

If your income is below the threshold, you will not have to repay any money.

When do I write off my student loan?
Under the current system, student loans are usually written off after 30 years, but a lot is still owed

However, the government plans to increase this period to 40 years.

If you drop out of school early, you will still need to repay your student loans.

Some people may choose to make additional payments to pay off some or all of their loans early – there is no penalty for doing so.

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