Student loans can really help those embarking on a course in higher education with their day-to-day living expenses, and they can do so at a relatively low interest rate which helps keep costs down when the borrowers begin making repayments. At some point at their time at university, most UK students will need financial support from the Student Loan Company to fund not just their degree, but the many expenses associated with the student lifestyle.
What are Student Loans?
A student loan is different from the more typical personal loans offered by loan providers as they can only be taken out by those who will be soon embarking on, or are currently undertaking, a university course. These types of unsecured loans come in a package made up of a tuition fee loan and a maintenance loan. A tuition fee is paid directly to a borrower’s place of education, though the person will still of course have to pay it back. Since the government decision to increase tuition fees, those now applying to universities across the UK can face up to £9000 costs for each year studying – almost £6000 more than students who started university before September 2012. Maintenance loans, on the other hand, are paid straight to the borrower’s bank account in instalments beginning at the start of term to assist with any living costs. At time of writing those living at home while studying can apply for up to £4,375 and students who intend to move out may be entitled to up to £7,675 – depending on where their university is located and their household income.
Most students will also receive some form of maintenance grant which fortunately does not have to be repaid. This amount is subject to their parent’s annual household income so those whose parents are high earners will only be considered for limited funding and, ironically, may be more reliant upon their student loan application.
Apply for a Student Loan
Those who require any such funding can apply for a student loan from the non-profit making student loans company using the gov.uk website. UK or EU full-time and part-time students can apply for a tuition fee loan, though a maintenance loan is strictly limited to full-time UK applicants.
As students don’t pay any upfront fees, student loan repayments can stretch for decades. Though it may seem graduates have a mountain of debt, they now only begin repaying this money when earning more than £21,000. Each student loans repayment will require borrowers to pay £9 for every £100 earned. If the debt is not fully repaid after 30 years, any outstanding amount will automatically be erased.
This seemingly impressive loan deal is still subject to student loan interest rates that must be paid depending on how much is borrowed, though these costs are particularly low. At time of writing, the current student loan interest rate is a competitive 1.5% APR (though this is subject to change, so the current rate should always be checked) and is paid from the time the first student loan repayment is made. Student loan repayments also offer much more flexibility than standard unsecured loans as graduates will not face any penalties for paying off some of, or the entirety of, their loan early.
Additional Funds from Student Overdrafts
For those students for whom student loans are insufficient to cover living costs, there is an additional option. Student overdrafts allow students to borrow additional money at a cheap rate, sometimes 0% interest, for the duration of their course and for a short time after.