If you’re headed off to university, it’s time to get independent - and this includes becoming financially independent. This means spending your own money, budgeting and saving for a rainy day. This is a big and perhaps new responsibility, so understanding student loans and how to finance your studies will be super important. This includes the types of student loans available, how much you can borrow, if and when you have to pay the money back and whether a student loan is right for you. Funding yourself for the first time may seem scary…but it doesn’t have to be! Stick around and let us demystify the complex world of student finance.
What is a student loan?
So first things first, what is a student loan? A student loan is a loan provided by the government in order to help you finance your studies. There are two types of student loan you should know about – a tuition fee loan and a maintenance loan. A tuition fee loan is the money you borrow to pay for your tuition (unless your parents have saved up to pay for it) and this goes straight to your university or college, meaning that you’ll never actually see the money. As of now, tuition fees stand at £9,250 per year, and you can borrow the full amount if needed!
A maintenance loan is the money you borrow to help with your living costs – your bills, food, textbooks, nights out, new clothes, basically anything! A maintenance loan will probably be your main source of income during uni, but the amount you’re granted depends on your parents’ income (more on this later).
Now that we’ve covered the types of student loans available – let’s take a look at the all-important application process.
You’ll have to apply for student finance every year until you’ve finished university, so the earlier you’re all clued up, the better! When applying for student finance, you can apply online or by post. The first step of the application involves filling in your own personal details: your name, address, details of your university course and so on. Once you’ve done that, the application will go to your parents, whose email addresses you will have provided earlier. If you’re estranged from your parents, you can apply for your student loans as an independent student, and you can find more on that here.
If you’re not estranged from your parents, they must provide their annual income to support your application, as it’s this figure that determines how much maintenance loan you’re eligible for.
Take a look at the table provided by Save the Student to see how your parents’ income affects your loan eligibility. It’s important to note that the amount you’re awarded depends on a couple of things. Whether you remain at home with your parents or move into student accommodation and whether you live in or outside London.
Student finance will get back to you six to eight weeks after you’ve submitted your application. They’ll tell you how much you’re due to be paid and when you’re due to receive your money. Result!
So that’s the application process covered, not so bad after all, right? But a finished application doesn’t mean the end of your student finance journey, and it doesn’t mean that you should spend wildly now you know your student loan is on its way. In fact, once your payments have been scheduled, it’s a good time to start thinking about whether your loan will be enough to cover everything you need to pay for, or whether you’ll need to rely on an extra source of income like a part-time job or a scholarship, bursary or grant from your university.
Once you’ve figured it out, all’s that’s left is to spend, wisely! Now that you’ve got a large sum of money at your fingertips, it’s crucial that you learn how to plan for all the important stuff. Try putting your money aside so you know not to dip into it, or working out what you spend in an average week so you’ve got a clear budget.
Paying your student loan back
Now, let’s fast forward to the end of your time at university. You’ve taken out three to five years’ worth of student loans and racked up a hefty bill – should you be worried about this so-called ‘debt’?
The short answer? No, you shouldn’t. The idea that you’ll be bogged down by your student debt after you leave uni is one of the most common misconceptions students face! Your student debt isn’t really a debt at all, at least not in the way other debts are. Student debt doesn’t affect your credit score, won’t lead to debt collectors and will be completely written off after 30 years! What’s more, you’ll only pay it back if your annual income is over the threshold, which currently stands at £27,295 for English and Welsh students and £25,000 for Scottish students. Is that a collective sigh of relief we hear?
But seriously, choosing to take out a student loan is a completely standard and practical way to finance your studies. Yes, there are other ways to make money here and there (hello bank of mum and dad!) but a student loan is the main source of income for the majority of students, and you shouldn’t be worried about the aftermath.
Whichever route you go down to finance your studies, the most important thing is making sure you have enough money to last you through the year. Do this, and it’ll be one less thing to worry about.