Personal Finance

How Does Student Finance Work? (UK Guide)

As a college degree becomes ever more important in the job market, more and more young people (and old!) are thinking about going to university. Nearly 50% of the UK’s population has some kind of university degree and that number only keeps on growing. 

For many, college is something that they cannot afford right out of the gate. Luckily for UK students, the government, and other institutions offer several avenues for student finance in the UK.

If you are thinking about enrolling in university or want to go back to college, and are wondering about student finances, we have you covered. We put together this comprehensive guide on English student finance and student loans in the UK to answer all of your pertinent questions. We will cover what kind of expenses you can expect, what student loans cover, and how you can pay back those loans when you graduate.

Without any further ado, let’s get to it.

What Kinds of Expense Will I Need to Cover?

First off, we need to discuss exactly what you need to pay for at university. 

Tuition Fees

All universities charge tuition fees to cover the costs of running courses. These tuition costs may also cover examinations, graduation costs, and other miscellaneous expenses. In the UK, tuition fees for universities are based on where you live. When you apply to a university, the school will assess where you are from and determine your tuition fees. 

The UK government puts a limit on how much universities can charge students in tuition. As of 2020, colleges in the UK can charge up to £9,250 per student. This restriction applies to all students in the UK and students from within the EU. 

Universities in Wales and Northern Ireland have tuition limits of £9,000 and £4,395, respectively. Scottish universities will not charge tuition for students from Scotland or other areas in the EU, but they are allowed to charge up to £9,250 for students from England, wales, and Northern Ireland. 

In general, fees for non-EU students are generally higher and may vary. Universities are constantly updating this info so make sure you check before you apply to a particular university. Tuition is the main cost of going to university.

Here are some of the things that student tuition costs will cover:

  • Seminars and lectures – lectures and classes are the main thing tuition covers. Depending on what kind of courses you take, you will spend time with specialized equipment and learning environments. 
  • Contact hours – contact hours are defined as all the times that professors and teachers are directly in contact with students. The amount of contact time you get depends on the courses you take. A fair amount of basically all courses will involve some independent study and research. 
  • Library – Tuition costs also cover your access to the university’s library. However, keep in mind that some library services such as printing and scanning documents may cost a small fee. 
  • Computer access – While many students might have their own personal computers, if you do not, then tuition costs cover your access to university-owned computers. You will most likely use these to submit course work and perform research. 
  • Administrative costs – Part of your tuition will also cover administrative costs i.e. costs for the day-to-day operation of the university. This includes things like paperwork, organisation, and other things that make the university function. Administrative costs may also include course registration fees and entrance exams. 
  • Student support – Tuition will also cover all facilities meant to support and assist students, such as career counselors or student financial services.

Living Costs

When it comes to living costs, the most expensive portion will likely be room and board. As a university student, you can opt for on-campus housing or rent a private residence. Before applying, make sure you thoroughly research your housing options and the cost.

In addition to rent, you will also need to factor in other costs like internet, utilities, and essential amenities. Insurance, clothing, and books, school materials, and transportation are other important things that factor into living costs.

Although UK schools do not generally require first-year students to live on campus, about 90% of first-year students do. The average living cost per month in the UK is around £1,300-£1,600, which comes out to around £15,000- £19,000 in living costs per year. Obviously, this figure will be higher if you decide to live and study in a large city like London instead of a smaller town. 

Fortunately for students, many businesses and public facilities offer discounts to students. For example, several public transportation schemes offer reduced fare for students. The National Union of Students (NUS) offers a card that gives discounts on several popular brands in the UK.

Living in student housing has a few benefits over traditional housing. If you live in student housing, then you do not have to pay the council tax. You will have to apply for this exemption through your local council’s website or physical office.

Here is a list of some of the cheapest places to live and study in the UK:

  • Cardiff
  • Hull
  • Leicester
  • Brighton
  • Portsmouth
  • Sheffield
  • Canterbury
  • Oxford
  • Plymouth

All of these are considered university towns and have been rated highly when it comes to an affordable cost of living. For example, the average cost of living per month for students in Cardiff is around £1,005. This figure includes rent, books, internet, food, travel, clothing, mobile phone, and a TV license (assuming you get a TV). 

How Does Student Finance Work?

If you do not have enough money to self-finance your education, then do not worry. No student in the UK is required to pay the tuition costs upfront. Rather, you can finance the cost through a loan for students.  Both full time and part time students can get a student loan.

Tuition Fee Loan

If you cannot cover the tuition cost upfront, then you can apply for a tuition loan from the UK government. Whether or not you are eligible for a loan and how much you can get depends largely on the specific university you are attending, how much the college charges, and when you started your courses. 

The UK government will loan out up to £9,250 if you are studying at a public university. Generally, the government does not offer student loans for attending private universities, although some exceptions may exist. 

If you are a part time student, then you can receive up to £6,935 in tuition loans. Similarly, if you are studying for an accelerated degree at an accredited university, you may also be eligible to receive up to £11,000 in a tuition fee loan

Eligibility for Tuition Loans

There are several factors that determine whether you are eligible to receive student financing from the UK government. Eligibility is based on your nationality and residential status, your age, your previous areas of study, and whether or not you are a member of the armed forces. 

You will be eligible for student financing if you are a permanent resident of England or have lived in the UK or EU for at least 3 years before your courses start. Even if you have not lived in the UK or EU for at least three years, you can still be eligible for government loans if you can show the government it was a temporary break in your residence. 

If you are an EU national and are beginning courses on or after 1 August 2020, then you generally will not be allowed to get student financing from the government. But, if your course begins before 1 August 2021, then your loans will continue until the end of the course. 

However, EU nationals can still be eligible for student financing if all of the following are true about you:

  • You have been living in the UK for at least 5 years
  • You will be living in England on the first day of the course
  • You must provide evidence of your 5-year residency, either through council tax bills, utility bills, wage slips, child tax credit letters, etc. 
  • You have student reports from the UK
  • Signed/stamped letters from your university confirming your dates of attendance

If you are a non-UK or non-EU national, then you may still be eligible for student financing if you have settled status, you have lived in the UK for at least 3 years before the start of your courses, and you will be living at home in England on the first day of your courses.

You may also be eligible if you are a refugee, you are under Humanitarian Protection or have a relative who is, you are the child of a Swiss national or a Turkish worker, or you are a stateless person. 

Fortunately, there is no upper age limit for receiving student financing. However, if you are over 60 years old, then you will not be eligible to apply for a maintenance loan (more on that later).

The UK government usually only allows you to get student financing if this is your first time pursuing a degree in higher education.  Tuition loans are still available if you change your courses, have to re-sit a year, or leave your current course and start another. 

If you have years of previous study then you can get tuition coverage according to this formula 

Current course length + one year – previous years of study

So for example, if you are enrolled in a 3-year course but have already had one year of previous study, then you should be eligible for 3 + 1 – 1 = 3 years of tuition costs. If your previous years of study overtake your current course of study, then you may not be eligible for the full tuition cost. 

As far as specific courses, your plan of study must be a BA, BSc, or BEd, foundation degree, certificate of higher education, Higher National Certificate, Higher National Diploma, Diploma of Higher Education, Postgraduate Certificate of Education, integrated masters, or Initial Teacher Training.  Full time students and part time students are eligible for student finance.

Lastly, the UK government offers special eligibility requirements for members of the armed forces and their spouses. If you are a spouse or civil partner, child or stepchild, or a dependent person living with a member of the UK armed forces, then you can be eligible for student financing. 

How Can I Pay my Tuition Fees With Loans?

Before you can pay your tuition fees, you must be registered at your college or university. Most of the time, you will register right before your first week or courses. 

Tuition loans are not paid to you. Instead, they are paid directly to the university in question by the government. Thus, you will never have to worry about moving funds around to make the payments yourself. The UK government will pay 25% of your tuition in the first term, 25% at the beginning of the second term, and 50% at the start of the third term.

How to Apply for a Tuition Fee Loan

You can apply for a tuition loan quickly through the student finance page on the UK government’s website. In order to apply, you will first need to create a student account. When you do this you will receive a Custom Reference Number and will have to create a password for your account. You will need to hang on to these in order to check on your loan status and to reapply for student loans in the future.

  1. Once you create your student account, you will have to fill out the student loan application form. You will have to provide some proof of identity the first time you apply, such as a UK passport or some other piece of evidence like a UK Birth Certificate.
  2. You will then have to give information about your household income in order to get loans that depend on your income level. 
  3. You will also have to provide details about your course start dates and bank account details.
  4. Lastly, the applications will ask you for your National Insurance number, which you can find easily through HMRC.

Depending on your application details, the government may contact you or your parents/partner to verify some details. If you are under 18 and have not had contact with your parents in over a year, then you may be able to apply as an independent student. 

If you want to reapply for student financing, the process is largely similar. 

Maintenance Loans

Tuition loans are specifically designed for tuition costs and cannot be used for anything else. To help cover living costs, you can apply for a maintenance loan. A maintenance loan will give you funding for your day-to-day expenses and are paid directly to your bank account. You can use that money to pay for whatever living expenses you have as a full time or part time student.

A maintenance loan is means-tested, meaning that the maintenance loan amount will be determined by your household income and where you plan to study. As of 2020, if you live alone away from home outside of London, then you can receive up to £9,203. If you live at home, then you can receive up to £7,747.

If you are living alone inside of London, then you will be able to receive up to £12,010 and you can also receive £10,539 if your course has study abroad requirements

The exact amount you will be eligible to receive depends on your income, whether you are under 25, whether you live with at least one of your parents, and your parent’s income. If you have not had contact with your parents in over a year, you can qualify for a maintenance loan as an estranged student.

Keep in mind that if you do qualify for a maintenance loan, then you will receive slightly less during your last academic year of study. This is because a maintenance loan will usually cover the interim between school years. During your last academic year, there is no further course you loan money for. 

Long Course Loans

If you are enrolled in a course that lasts longer than 30 weeks, then you might be able to get a Long Course Loan as extra financial support as well as a maintenance loan. Like maintenance loans, long course loans depend on your household income, where you are studying, and where you will be living while attending university. Fortunately, you do not have to apply separately for a Long Course loan. The UK government will determine whether you can get one when you submit your student finance application. 

Most of the time, Long Course loans come in the form of smaller weekly payments directly to your bank account. For example, if you live with your parents, then you can get an additional £65 a week. If you are outside of London living away from home, then you can get up to £99 extra a week. Those living away from home in London may receive up to £127 a week. Lastly, if you are living abroad, then you may be entitled to receive an additional £137 a week

Special Support Grant

Special Support Grants may be issued to full time and part time students under certain circumstances to give them extra financial support. You may be eligible for a Special Support Grant if your annual household income is under £41,065 and any of the following are true about you when you are taking your course. 

  • You are a single parent or foster parent under 20 who is a full time student.
  • Either you or your partner are full time students and you have a child under 20 who is pursuing full time undergraduate education
  • You qualify for the Disability Living Allowance, Disability Premium, or Severe Disability Premium. 
  • You qualify for Personal Independence Payments
  • You are deaf and qualify for a Disabled Student Allowance
  • You have been judged incapable of work for at least 28 weeks
  • You have taken time out of your education due to illness
  • You are over 60 years old

As of 2020, you can receive up to £3,694 for the 2020/2021 academic year. You do not have to repay this grant, although you must continually update your household income data which can affect the amount you will receive. 

You do not actually have to apply separately for a maintenance loan. You will be considered for one whenever you apply for a tuition fee loan. 

When Do I Have to Repay My Student Loans?

If you get student financing then you will have to repay back both your tuition fee loan and maintenance loan. You do not have to repay any special grants you receive. 

As of 2020, you will have to start paying off your loans once you complete your schooling and are making at least £26,575 a year, £2,214 a month, or £511 a week

Student loan payments are automatically performed through the tax system and depend on how much you make over the threshold for repayment. Payments will be deducted from your money every pay period, which means every time you get your salary. Depending on your job, this could be once every month, once every week, or more frequently. If you fall below the payment threshold then payments will stop. 

To be more specific, you will start paying back your loans on 6 April after you graduate from university. The government keeps track of your income through your National insurance number. Once you make above the threshold, they will notify HMRC to contact your employer so they can start making deductions from your salary. Once you repay the loan in full, the payments will stop. You will be reimbursed if you make any payments after your loan has been fully repaid. 

Starting out, you will have to pay back 9% of the income that you make over the threshold for repayments. So for example, if you are making £35,000 a year, then that puts you £8,425 over the £26,575 threshold. 9% of £8,425 is £758 so you will have to pay at least £63 a month. 

If you are self-employed, then your repayments will be calculated based on any tax returns you provide to HMRC. As such, you will have to make payments on at least a yearly basis. If you are overseas when your repayments start, then you can file an Overseas Income Assessment Form which calculates how much you owe. 

Keep in mind that you will also have to account for any interest on your loans. While you enrolled in school, interest rates are set at the UK Price Retail Index + 3%. After you graduate, the rate will be determined by your income. 

Can My Student Loans Be Cancelled?

If you apply for loans but your education plans change before you start school, then you can amend or cancel your loan application. However, once the first day of the first term starts, you will be required to pay back 25% of your tuition fee loan. This liability increases to 50% after the start of your second term and 100% after the start of your third term. 

Your student loans can be written off in some circumstances. If you have a Plan 2 loan (which most students nowadays have) then your loans will automatically be written off in April 30 years after you leave school. Also, if you die or become permanently disabled before making all of your payments, the loan will be written off. Student loan debt will not be transferred to another individual in the case that you die before paying them off. 

Student Loan FAQ

How long does the student loan application process take?

In general, it takes about 6 weeks to process student loan applications. Students can apply for loans even if they have not been accepted to a university or college yet. Depending on the circumstances, it may take a few weeks longer to process an application. 

Do I have to make separate applications for tuition fee loans and maintenance loans?

No, you only have to complete one loan application form to assess all tuition fees and maintenance loans, along with special grants. A handful of additional support options will require an extra form to be filled out and submitted with the main application. 

When do student loans come in?

Once you have signed and returned a declaration and enrolled in a university course, your first payment will be released 3-4 days after.

When do I have to start repaying my student loans?

You will begin to make repayments after you graduate and once you make you make over the threshold for repayments. As of 2020, this threshold is £26,575 per year. Payments will automatically be deducted from your salary pay.

Can I pay off my loans early?

Yes, you can contact the Student Loans Company and make early payments. Doing so can help you pay off your loans earlier. 

Final Thoughts

So there you have it, everything you need to know about student loans. Thankfully, the UK has a much more forgiving student loan structure than other countries and there are very flexible repayment terms. So, if you are looking into getting student loans to finance your education, then this guide will give you all the knowledge you need to take your first steps.  Student finance can be intimidating, but you can get the financial support you need whether you are living away from home or are living at home.

About author

Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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