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Student Loans Explained

Gauri Chandra
Student Loans Explained

Illustration by Siege Media

The English student loans system can be a bit confusing when you’re starting out as a student. Whether you’re already at university or starting soon, this breakdown could hopefully make the understanding process a bit easier!

What loans are available?

Student Finance England has a few different grants available to you. 

The main one is your fee loan - this is paid directly to your university and is available up to £9,250, which is the cap on what universities can charge. Most students are eligible for this, and it is in place to help students from any financial background go to university for the undergraduate degree. 

The loans differ for undergraduates and postgraduate students. There is no fee loan for postgraduate students and they are only provided a maintenance allowance.

To help with living costs such as food and rent, there is the maintenance loan. This one is dependent on your household income, as the loans company expects you or your parents to fund some of it. The maximum amount for this is around £9k at the moment, but this varies every year. If you are studying in London the maximum is slightly higher to account for higher costs of living. This amount is not affected by any part time work you might take on during your studies.

Disabilities or health conditions could also make you eligible for other grants to help you with your studies. If you have a child under your care you could also be eligible for more allowance to help with this. 

Now the dreaded part - repaying all that loan debt.

When do I have to repay it?

The good news is that there is a threshold income amount at which you are expected to start repaying it. So if you have just graduated and are in a position where you can’t work and have no income, there really is no pressure on you. 

The income threshold for anyone starting at the moment (or who has started after September 2012) is £27,295 a year or £2,274 a month. If your income is above this, you need to start repaying it. Loans are also written off if you haven’t repaid it within 30 years. So in essence you could just never repay it if you never earn enough! 

How is it repaid?

Well your repayments are meant to be repaid at 9% of your income earnt over the threshold. This means that if you earn £29,000 a year (£2,417 a month), this is only £143 above the threshold (£2,417 minus £2,274). Your monthly repayments will be 9% of £143, which is only £12.87 a month.

The interest on your loan repayment is dependent on the retail price index (RPI) in the UK for that year. Your interest is RPI + (up to) 3%. This might seem quite confusing, but you can learn more about the interest on repayments here. 

How and where do I apply?

There is a simple centralised system to apply for your student loan, and you do not need to go through a bank and you don’t require a credit score. All you need is a bank account where your money can be deposited. The student finance registration link is this one, and the portal is quite self explanatory with a lot of guidance during the process!

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