Universities in the UK are costly but definitely worth it. That’s why the UK Government set in place a loan system for British students and EU students with settled status to make it affordable. With a student loan, you can pursue higher education now, and pay for it later.
Technically, higher education in the United Kingdom is not free for anyone. In fact, it has some of the highest costs in the world. However, there is a way to study without paying a pound during your programme. That is because the government established a loan-based system for students to pay tuition fees in order to make higher education affordable. Until Brexit, EU and EEA students could benefit from these loans as well, but after Brexit, the loan system remained available only to UK nations - England, Scotland, Wales, and Northern Ireland - plus The Republic of Ireland.
How do student loans work in the UK?
What are Student Loans?
Student Loans are financial aid offered by the British Government to students attending higher education. The loans can cover tuition fees in full and help with maintenance costs during your study programme. When your loan is approved, the Government will pay your tuition directly to the university.
To be eligible for the loan, you must fit one of these categories:
You are a UK national
You are an EU student who holds settled or pre-settled status in the UK
You are from the Republic of Ireland
Types of Student Loans
There are two main types of student loans:
Tuition Fee Loans, which cover the cost of tuition fees charged by universities or colleges. The loan is paid directly to the educational institution, and the amount available depends on the institution's fee structure.
Maintenance Loans, which help with living costs such as accommodation, food, books, and other expenses. To apply, you must send proof of your household income, and the maximum amount you can receive depends on which city you live in, whether you live with your parents or alone, as well as your age. This loan is paid directly into your bank account at the beginning of each semester.
How do you apply for a Student Loan?
The application process is not complicated and the British Government offers all the necessary information on their website.
Check whether you are eligible for a loan: undergraduate studies, or Master’s studies, or doctorate studies.
Set up a Student Finance Account
If you’re applying by post, find and download the form you need.
Include all required evidence, such as proof of identity or proof of household income.
Check the deadline for application: it depends on when your course starts.
What are the advantages of a student loan?
1. Minimal interest
Unlike with a bank loan, your interest is minimal, so the sum you have to pay back is almost the same as the sum you actually borrow and not considerably higher, as with bank loans.
2. Only pay back after graduationAfter you graduate, you don’t start paying until your income reaches a certain threshold. The threshold is different for each country, and you will have to pay back based on the country in which you reside when you make the payments. Whenever you move to a different country, you have to inform the Student Loans Company, and your repayment plan will be recalculated. The government sets a certain threshold reported to the medium gross salary of that country. When you start earning more than the threshold, you start paying back 9% (for undergraduate loans) or 6% (for postgraduate loans) of the difference between your salary and the threshold.
3. Have the loan written off if you can’t pay it backYou may be exempted from paying the loan, in certain scenarios. If you are unemployed, receive benefits, go back to studying or any other situation where you don’t have a constant income, you stop paying the loan. In addition, if 25, 30, or 40 years after graduation, depending on which plan you’re on, you are still unemployed and haven't started paying back, your loan will be annulled.
Are there disadvantages to taking a Student Loan?
The main downside to taking a loan is that you do have to pay it back, and it will likely take years before your debt is fully covered. If you have the possibility, you might consider paying for your studies upfront. Another alternative is to find a study programme in a country with more affordable tuition fees or even free higher education.
But does Student Loan affect mortgage application in the UK? Unfortunately, yes, but not to a great extent because the monthly amount you have to pay back is not a large one. The specific details of how it affects your application must be checked with the bank where you apply for a mortgage, but the important thing to remember is to make sure you inform them about having a Student Loan.
What are the Student Loan plans?
The Student Loans Company offers 5 different plans for students, depending on when they took the loan and their level of study.
- Plan 1: if you started your undergraduate studies before the 1st of September 2012
- Plan 2: if you started your undergraduate studies between the 1st of September 2012 and the 31st of July 2023
- Plan 4: if you applied for a loan through Student Awards Agency Scotland
- Plan 5: if you start your undergraduate course on or after the 1st of August 2023
- Postgraduate Loan: if you take out a loan for a postgraduate degree.
Apart from your current country of residence, the repayment threshold is different depending on your plan as well.
Managing Student Loans
Managing your Student Loan is simple. The first April after you graduate, you become eligible to start paying back your student loan. The Student Loans Company (SLC) will send you a letter asking for evidence of your situation. If you’re employed and earn above the threshold, you’ll have to set up a monthly payment method. Otherwise, you’ll be exempt from paying for the next year or until your financial situation changes.
The kind of evidence they require includes:
- Paychecks
- Original contract showing gross salary in English
- Bank statements
- Letter from a person who takes care of you
In addition, if you want to make an extra repayment of any sum, you can always do so voluntarily, or you can pay back the loan in full.
Can international students apply for student loans in the UK?
Student Loans offered by the UK Government are not available for international students. Before Brexit, they were available for EU/EEA students as well. However, if your course starts after the 1st of August 2021, usually, the only way you can benefit from the loan as a student in Europe is if you already have settled or pre-settled status. It means you have the right to live permanently in the UK, and to be eligible to apply for it you must’ve lived here for 5 years before applying. Students from Ireland are an exception to this rule. They can still study in the UK without a Visa and apply for a Student Loan without the EU Settlement Scheme.
Moreover, students from the commonwealth countries cannot apply for a student loan either, but they do have the option of applying for a Commonwealth Scholarship.
To conclude, Student Loans make it possible for many students living in the UK to take advantage of excellent higher education regardless of their financial situation.
