A Guide To Student Loans

The concept of finances can be confusing, especially to the young. Student loans seem daunting and scary to many students and parents alike, but the good news is that you do not need to worry. Borrowing money for your studies is simple, manageable and extremely low-risk.

What Is a Student Loan?

Student loans are a scheme organised by the government through the Student Loan Company (SLC). They are designed to be free of charge (in loan terms), meaning that the interest rate is 0%, but they do gain some value because of inflation (the general national increase in prices of goods and services). However, this is easily the cheapest loan you will ever find, and the vast majority of students take one out.

There are two types of student loan that you can borrow. One is for tuition fees (the price of your course set by the university, the current maximum being £3,225) and is paid directly from the SLC to the university. The other is a ‘maintenance’ loan, paid directly into your bank account for the purposes of general living costs.

Am I Eligible For a Student Loan?

In order to be eligible for a student loan you need to be able to prove that you are either in full-time university education in the UK or about to enter it. This is usually done through a service called UCAS, but the SLC also have procedures for mature students.

The amount that you can borrow is ‘income assessed’ (it depends on your household income). If your parents earn over a certain threshold you will only qualify for the standard maintenance loan (although you are still eligible for the full tuition fee loan). However, if they earn under that threshold, you are able to borrow additional money. The income assessed procedure does not apply to you if you are over 25, have financially supported yourself for more than 3 years, you are caring for a child or you have no living parents.

Paying Back My Student Loan

You start paying your student loan back when you have finished or left university and you have an annual income above £15,000. If you are earning below this, you do not have to make any repayments. If you started your course after September 2006, you will have your outstanding debt wiped clean after 25 years. The amount you pay is 9% of whatever money you earn over £15,000 (if you earn £15,100, you will only have to pay 9% of £100 each year).

For more details and how to apply for a student loan, visit the SLC web site at www.slc.co.uk.