Finding your feet with Student Finance

By Brett Dickinson

So you’re thinking about going to University? Fantastic. Whether it’s local or further afield, a BA or BSc, your favourite subject from school or something completely new, university will offer you lots of opportunities to learn more, develop who you are and become more independent. But £9,250 seems like a lot of money (because, well, it is). However, for many people university is still worth doing so this guide aims to give an up-to-date explanation on how student finance works and to hopefully show that money does not have to be a barrier to going to university.

What’s the plan?

Since the introduction of student loans in the 1990s, there have been a number of different types. For your first degree (as your starting after August 2023) the type you need to know about is Plan 5.

There are also two aspects to the money you can borrow tuition fees (this pays for your course) and the maintenance loan (this is to help you live). We’ll start with the tuition fees

Tuition Fees:

These are paid directly from the student loan company to the university, so you apply for your student loan to the student loan company. It then processes the loan and pays it to the university. If you’re a UK national and this is your first degree you’re likely to be eligible for this loan. Most universities charge £9,250 per year at the moment and this figure is capped until the 25/26 academic year.

What happens if I drop out/change course/ have to redo a year/leave and come back?

Life is rarely straightforward and whilst nobody plans for any of those options, there is provision within the student loan system for that. The formula used is:

Length of current course + one year – years of previous study

What that means is that if you already did a year of study but dropped out/changed course the + one year and the – year of previous study cancel out and you have finance for the current course. If you dropped out after two years or repeated a year more than once it gets a bit more complicated nut you may be able to apply for an extra year of support depending on your circumstances.

Maintenance Loan:

The maintenance loan is a little more complicated. This is the money you can borrow to support your living expenses (rent, food, fun things etc). The loan is normally paid in three chunks, one at the start of each term. However, the quantity of money you can borrow is dependent on a number of factors:

1. 1. Where you’re living – The amount you can borrow for the maintenance loans varies depending on if you’re living at home, away from home or in London (the theory being at home is cheaper, and London is very expensive compared to the rest of the UK)
   2. Family Income – If you’re under 25 your maintenance loan is dependent on the income of where you normally live so your parent’s income (or parent + parent’s partner if they live there even if they’re not related NOT however sibling income). The maximum loan (for living away from home, outside London) is £9,978 and at a household income over £25,000 this number starts to decrease gradually till it reaches a household income of £62,000 when the most a student can receive is the minimum loan (about half the amount). Sadly, this system does not take into account whether parents have the means or intention of helping a student with their living costs (but that’s how it is).

Repayment, the good news and the bad news:

As with any loan, it’s not free money. At some point you’ll need to pay it back. Here are the key things you need to know, up to date for plan 5.

1. 1. You don’t pay until you leave university (or for a plan 5 loan April 2026 whichever is last, so if you dropped out, which we hope doesn’t happen, you still won’t be repaying till April 2026)
   2. You only start repaying when you earn over £25,000. If you’re earning under that amount you don’t pay. The £25,000 has been frozen till 2027 then is likely to change with inflation
   3. What you pay depends on what you earn not what you owe. You repay 9% of anything earned over the threshold so at the moment if you earn £26,000 you’d pay £90 over the year (9% of the extra £1000) or if you earn £45,000 you’d pay £1,800 (9% of the extra £20,000). Regardless of whether you owe £500 or £50,000 or anything in between.
   4. After 40 years (it was previously 30 however one of the plan 5 changes was a nicer interest rate but a longer repayment time) from the April after you leave university any outstanding debt is wiped out. This is rare in a loan, but if you’ve not earnt enough over that time you won’t be forced to pay it back.
   5. If you’re employed by a company it’s repaid automatically. Like tax your employer will just take it from your pay packet. If your self-employed you have to do it by self-assessment the same as tax.

A few final thoughts:

That’s the system as it stands, this doesn’t mean it won’t change over. So keep aware of any changes and how they may affect you.

There are also a number of scholarships/bursaries/grants which are always worth looking into when applying for University (they may help with tuition fees, the maintenance loan, or both).

Also many students work part-time and/or holiday jobs whilst at University giving another way of getting money in to supplement the maintenance loan or reduce the amount of loan you apply for.

At the end of the day if university is something that you want to do, there is finance to enable you to do it. The system is a bit complicated but hopefully this guide helps you understand how it works so you can make an informed choice about university.