Whether you’re a current university student or you’re just about to leave college and are considering higher education, it’s likely that you’ll be concerned about one thing – the ins and outs of student finance.
Updated: 30 Jan 2025
The world of tuition fees, student loans and repayments is increasingly becoming a difficult one to understand – particularly with the cost of living constantly on the rise.
It wasn’t that long ago when university education was free, and now you have higher tuition fees wrapped up within a host of wider changes. All this has unfortunately (and predictably) resulted in a lot of confusion and a fair few myths.
It’s time to battle against the misconceptions and provide you with the information that you really need to know…
If you’re already thinking about mortgages and the like in the not too far and distant future, the idea that your student loan could have a negative impact on your credit rating is probably a real concern.
But you’ll be pleased to hear that student loan debt isn’t actually viewed in the same way as other commercial debt like bank loans, credit cards and store cards, and so won’t affect your credit rating.
So, whether you want to get on the property ladder straight away or leave it a while, this isn’t something you need to worry about!
Nope, not true either. You only become eligible to start repaying your loan the April after your course ends. And only if you are earning over the repayment threshold, which depends when you got your loan and which country you're from in the UK.
It's important to note that the thresholds will vary year to year. Loans from Student Finance England have a threshold of either £27,295 or £25,000 depending when your course started. If your loan is from Student Finance Wales, the threshold is £27,295. If you got your student loan from Student Awards Agency for Scotland, its £27,660. If you got finance from Student Finance Northern Ireland then the threshold is £22,015.
Once you earn over the relevant threshold, you’ll pay back 9% of any earnings over the threshold. The money will be taken straight out of your pay at the same time as tax and National Insurance - before you receive it - so you probably won’t even notice it.
As with many things in life, having money can help, but it shouldn’t be a factor for getting a university education.
Firstly, it’s worth noting that all UK students are eligible for student loans to cover their tuition fees and basic living costs of university.
There’s also further financial help available for eligible students in the form of maintenance grants, and scholarships and bursaries given out by the university and charity organisations. In short, there’s plenty of support out there, so don’t let the thought of money put you off.
It’s easy to see why students think they might be paying their debts off forever, but this just isn’t the case.
Yes, as you only pay off a small amount each month, the loan can take a while to be repaid in full. But it will go down eventually.
And student loans also eventually get written off. This is after either 30 or 40 years, depending on which student loan plan you're on.
It’s true that universities will be able to charge up to £9,535 per year from 2025/26, but the reality is that some have chosen not to. In fact, in some ways, it’s created more competition which you might be able to take advantage of.
And don't forget how much you pay is also dependent on where you grow up. For example, if you are Scottish and you go to uni in Scotland, you don't pay fees. And most Welsh unis charge £9,000, not £9,250.
In any case, the majority of institutions are offering bursaries and scholarships to help with the cost, so this should never be a reason to put you off getting a degree where, and in what, you want to study.
There's also the option of studying a two year accelerated degree. These may cost more per year (around £11,000) but could save you up to £5,000 when compared to a three year degree. And yes, you can get student loans to cover the full £11,000 fee each year.
Yes, the graduate job market is tough. But even though a degree isn’t a direct ticket to the job of your dreams, it’ll certainly boost your employability and show employers that you’ve spent the past three or four years learning and honing your skills.
The economy and job market could also improve by the time you graduate, so getting a degree in the meantime could be a very wise move.
It can be tempting to pay off your student loan as soon as you graduate, particularly if you get a good job and are earning a decent income.
However, it’s not necessarily the smartest move for most people. Student loans come with low interest rates, and putting any extra cash you save at the end of the month into a separate savings account could be a much better long-term option for making your money go further.
It probably won’t be long until you need to take out a commercial loan at much higher interest (such as a mortgage), so just make the minimum student loan repayments to save borrowing later at a much higher cost.
Hopefully we’ve helped you to get the facts straight and you now have a clearer picture of how student finance works. It might be a complicated beast, but it’s well worth knowing what you should be thinking about!
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