There is a lot of talk in the media and politics on how unfair it is to burden students with such an amount of debt even before they graduate. In my view, this is often done for political point scoring however. The detail of how it all works is very different and I would argue that the student loan system is more a graduate tax (which even then is low in most cases) rather than a loan. Below are some links to support my argument, but let’s see…
Disclaimer: I am not a financial adviser and nothing on this page is intended to be financial advice. This is just a summary and representation of some of the facts and myth busting links, linked to student finance and student loans in England. All the information on this page is correct at the time of writing (08/2021) but it’s advisable to do your own research as some of the figures on this page may become out of date before I have the opportunity to update them.
Building on the facts of the previous page:
- Most students don’t pay everything back. Ref.: https://fullfact.org/education/about-17-students-are-forecast-fully-pay-back-their-loans/
- You only start paying back when you earn a certain amount of money and only then. If your wage drops, your payments drop again. Ref.: https://www.gov.uk/repaying-your-student-loan/what-you-pay
- If you pay back your loan in full, with interest, this means that you’re lucky because you’ve earned a lot of money. If you earn £35,000 a year, you will take home £2,230.88 a month. You will pay £57 a month back on your student loan. Ref.: https://listentotaxman.com/35000?plan=plan2&pension=
- If you take out the maximum student fee loan (£9,250 a year) and the maximum maintenance loan for your living costs (£12,382, which depends on your family’s circumstances and where you study) you still pay the same percentage back – 9% over the threshold (figures correct at the time of writing). Ref.: https://www.gov.uk/repaying-your-student-loan/what-you-pay
- Whether you have paid everything back or not, your loan is scrapped after 30 years. This is very different from a mortgage for a house or a loan for a car, where the bank will need to have everything repaid, or things can be repossessed. This may look like a long time but it’s not a ‘dark cloud’ that hangs over you the rest of your life, as some would suggest. Ref.: https://www.gov.uk/repaying-your-student-loan/when-your-student-loan-gets-written-off-or-cancelled
To try out the figures, I would recommend having a look at the dead reckoner on Martin Lewis’ website: https://www.moneysavingexpert.com/students/student-finance-calculator/ Bear in mind that this is based on estimates of how much your initial wage will go up, so it’s an estimate. There are also some really useful links on there to help you find out the facts.
What not to do
(but consider your own situation. This is not financial advice, just a point of view for you to explore and think about)
- Borrow money from a bank to pay for your student fees and living costs. This is a ‘proper loan’ you will have to pay back.
- Save up a lot of money to pay your student fees yourself. Instead of saving up for the student fees, put that money away as a deposit for a house. The student loan isn’t the financial burden it’s made out to be.
- Pay back your student loan early and run yourself down to earn enough money to do so. This may in fact cost you a lot of money if you wouldn’t have paid your loan back in full otherwise. Think about it: the more you earn, the more you pay back.
What you do need to take into account
Your maintenance loan is normally not enough to cover all of your living costs. The government expects your parents to pay the shortfall. However, this is obviously not always possible, so you may need to find a part time job alongside your studies if it isn’t. Alternatively, you or your parents need to save up for this shortfall, but see it as an investment in your future.
The benefits of the student loan system in England (as I see it)
- In countries where the state fully sponsors higher education, it may be the case that they limit places on courses to keep government spending in check. This is less, or not the case in a country with a student loan system. So you may have in fact more choice in what to study and more chance of getting in.
- The fact that there is money involved, even though you won’t see it in the case of tuition fees, helps you focus your mind on what is important to you in a degree and why you want to do a certain subject at university.
I hope this has been helpful already in making you feel less worried or anxious, if you were to start with, about the student loan. There’s also a useful video on https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/
Different funding streams
Basically, there are several funding streams students can access, linked to different kinds of expenses. These are broadly divided up into:
- Information can be found on https://www.gov.uk/student-finance/extra-help
- Scholarships and bursaries which are linked to student fees, books and other expenses directly linked to your studies, mainly offered direct from universities but also from charities and companies. Have a look on any course page on www.ucas.com or on the course pages of any university website.
Further (very brief) details:
- Student fees
- Bursaries and scholarships
- Student loans
- Living costs
- Studying with the Open University
- Your student fees may be up to £9250 per year, depending on the course and the university you study with.
- You can get a student loan which will be repayable after you finished your studies and once you earn the equivalent of £25000 (adapted to index) per year.
- You can get other support in the form of a maintenance loan.
- Further information can be found on: Student Finance England
Bursaries and scholarships:
- For many courses there are bursaries and scholarships available which don’t normally need to be paid back.
- These bursaries and scholarships are dependent upon you adhering to certain conditions, or falling into certain groups of the population.
- These can be different from university to university and from course to course.
- Details can be found in the information about each course on the UCAS website.
- Many banks offer student loans to students.
- These are commercial loans which are subject to a commercial, albeit often lower, interest rate.
- It may be useful to talk to your bank to see what the options are.
Some students whose parents are on a low income may be entitled to support with their living costs.
There is more information on these on the websites for each region mentioned above.
Studying with the Open University:
In the UK, more and more students seem to opt for the Open University as their first choice of study and they are doing so for a number of reasons:
- The Open University can work out a lot cheaper than a mainstream university, even though the OU is raising their fees as well from this year onwards.
- Student funding is available for part time students as well; a lower fee means a lower student loan.
There are some ‘risks’ attached to OU study as well:
- There is no immediate support network available in the form of your fellow students. There is an online system available for student to student communication however.
- Since you are studying from home, student life will look very different compared to that at a mainstream university.
- You need a lot of determination to succeed. You are mainly studying from home.
- studentfinance-yourfuture.direct.gov.uk or on the direct.gov.uk website
- www.moneysavingexpert.com/students/: excellent additional information on student finance and finance in the UK in general. Here you’ll find lots of common sense advice and they have a fantastic student loan calculator as well. You can try out different scenarios to see how it’s all going to work out.
Continue to: Student Finance – Living costs