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Going to university guide Student loans and finance

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Many students will be managing their own personal and household finances for the first time

University can be hugely expensive and for many students it’ll be their first time managing their own personal and household finances.

You can comfort yourself with the thought that, on average, graduates earn 55% more over their working lives than those who start work at 18, but getting a degree in the first place isn't cheap. It now costs more than £30,000 to complete a three-year degree course, with tuition fees and accommodation taking the lion's share. Estimated annual costs (London/outside London) for 2010/1 were:

  • tuition fees - £3,290/£3,290
  • accommodation - £5,069/£4,004
  • food - £1,788/£1,788
  • leisure - £1,197/£1,197
  • books - £978/£978
  • transport - £648/£648

Financial products and options for students include:

You can also get extra help if you have children or adult dependants, a disability or a specific learning difficulty.

Student loans and grants

Student loans are issued by Student Finance England on behalf of the Government. If you are an eligible full-time student taking a higher education course at an institution in the UK, you can apply for a tuition fee loan and a separate maintenance loan (to cover the cost of living expenses). Most students take both.

(Note: different arrangements apply for students living in Wales, Scotland and Northern Ireland. Slightly different arrangements and/or amounts may apply to students who started their course in previous years).

Tuition fees

If you’re an English student starting a full time higher education course, the maximum amount of tuition fee you can be charged for the 2011-12 academic year at an English university or college is £3,375. How much you’re actually charged will depend on the university or college you attend, your course, and where in the UK you study – institutions in Wales, Scotland and Northern Ireland may charge different amounts.

Tuition fee loans

If you’re an eligible full-time student you can apply for a tuition fee loan to cover the whole cost of tuition fees you are charged for each year you are at university (up to a maximum of four years). The amount you receive does not depend on household income. The loan is paid directly to your university, and it is not paid into your bank account. For 2011-12 the maximum tuition fee loan is £3,375.

Maintenance loans

The second loan you can apply for is a student loan for maintenance. This covers your living costs, including accommodation, books and other materials, and food. The maximum amount you can borrow depends on your circumstances – your household income, where you live while you’re studying, and so on. For 2011-12, the maximum amounts are:

  • £6,928 if you are living away from home in London
  • £4,950 if you are living away from home outside London
  • £3,838 if you are living at home.

The same amounts of living cost support are payable regardless of whether you study in England, Wales, Scotland or Northern Ireland.

Any money due to you is paid into your bank account, usually in three equal instalments at the start of each term.

All eligible students qualify for 72% of maximum maintenance loan, regardless of household income, but the rest is income-assessed. For 2011-12, the income threshold to get the full student loan is £50,778. If your parents' joint income is higher than this, the amount you can borrow falls on a sliding scale. The assumption is there will be a 'household contribution' to top up the sum you receive.

For a student living away from home and studying in London this is £1,940 for household incomes above £60,478, for a student living away from home and studying outside London it is £1,386 for household incomes above £57,708 and for a student living at home it is £1,075 for household incomes above £56,153. You can get an idea of what you will receive by using the Student Finance Calculator.

Student maintenance grants

Many new students will also be eligible for a full maintenance grant, which does not need to be repaid. How much you could receive depends on parental (household) income. For 2011-12, the maximum grant is £2,906. This is awarded to students with household income of £25,000 or less. Where income is between £25,000 and £50,778, the grant is reduced on a sliding scale. Where the household income is more than £50,778 no grant is paid.

If you’re getting help through the maintenance grant, it’s assumed you won’t need to borrow as much through the student loan for maintenance. So if household earnings are over £25,000 the amount you're eligible for through the student loan for maintenance will be reduced by £0.50 for every £1 of maintenance grant you're entitled to. This means that if you come from a lower income household, you’ll have less to repay when you finish studying and start work.

 You can get a good idea of how much you could receive by using the Student Finance Calculator.

Bursaries

All universities and colleges in England who charge full fees for a course must offer bursaries to students in receipt of full maintenance grant. In 2011 - 2012, institutions charging the maximum tuition fees (£3,375) have to offer a bursary of at least £338; many universities and colleges are offering more than the minimum bursary, and not just to those in receipt of full maintenance grant. The average bursary for a student in receipt of the full maintenance grant and studying at an English university charging full fee for their course is currently around £900.

Other help

You may be able to get extra help on top of student loans, grants and bursaries if you’re disabled or have a specific learning difficulty or mental health condition. Extra help may also be available if you have a child or adult dependant.

The Access to Learning Fund (available through your university or college) can provide help for students on low incomes who get into financial difficulty.

Further information

For more about help for full-time students go to www.direct.gov.uk/studentfinance

Student finance for part-time higher education students in England

Help is also available for part-time students undertaking higher education courses.

Part time students can get a fee grant to help with tuition fees, and a course grant to help with study costs, such as books, materials and travel. If you’re getting certain benefits, you’ll qualify for the maximum automatically. Otherwise, how much you can get depends on your personal circumstances and household income. Any help you get through the fee grant or course grant doesn’t have to be paid back.

The maximum fee grant you can get is also based on how ‘intensive’ your course is - how long it takes to complete compared to the equivalent full-time course. For the most intensive courses, the maximum available for 2011/2012 through the fee Grant is £1,495.

The Course Grant does not depend on how intensive your course is and the maximum amount payable is £265.

For more information about the help available for full time students go to www.direct.gov.uk/studentfinance

How to apply for a student loan

It’s best to apply for student finance as soon as possible after you’ve made your university course application.

You can apply online using the Student Finance Direct website or by downloading a PN1 form to fill in and send back to the Student Loans Company.

There are different application procedures for full-time students, part-time students, returning students and those applying for a teacher training, social work, and Open University or healthcare courses. You can find out full details of how to apply for student loans on the DirectGov website.

Paying back student loans

Loans are paid at the start of each university term and attract interest at a rate linked to inflation (RPI) or Bank of England Base Rate.This is normally much lower than commercial rates. In 2011-12 the rate of interest charged on income-contingent loans will be 1.5%. 

The repayment of student loans is managed through the tax system (PAYE) and only begins after you’ve left university and are earning more than £15,000. You pay back 9% of all you earn above the £15,000 threshold. Someone earning £18,000 a year will have to pay 9% of £3,000 (£18,000 minus £15,000) - around £5.19 a week.

For students starting a new course in September 2012, a new system will apply, with a higher income threshold for repayments and a higher rate of interest.  

Student bank accounts

Despite the penniless student stereotype, banks are keen to attract students with accounts tailored to their borrowing needs. There’s a choice of student accounts from major high-street banks. What you’ll get depends on the bank but many student accounts offer:

  • a free overdraft facility of up to £3,000
  • a debit card (such as Visa, Solo or Electron)
  • an optional credit card
  • an incentive for joining, such as a student rail card or discount on mobile broadband

How to choose a student bank account 

Read our Student bank accounts report to see how popular accounts compare.

  • Ignore free gifts - the best incentive should be the money you’ll save by choosing the right bank account for your needs.
  • If you’re worried about getting into debt early on, choose a student account that offers a tiered overdraft limit that can be increased incrementally each academic year, such as Barclay’s Student Additions account.
  • Check the availability of bank branches and cash points near your university and term time address before choosing a bank.
  • You may not necessarily be given the advertised overdraft limits. What you're offered can depend on your personal circumstances.
  • Think long term by checking what happens to account benefits (such as interest free overdrafts) when you graduate.

Graduate bank accounts

When you graduate, so will your student bank account. Many banks let you keep a student account for an extra interest-free year or formally transfer it to a graduate current account. Banks offer interest-free overdrafts to graduates for up to three years (but the overdraft limit normally reduces year by year). What graduate accounts involve depends on the bank, so it’s worth shopping around.

Our Student bank accounts report has details of the top graduate bank accounts for you to compare.

Graduate loans

You may be able to apply for a graduate loan if you’re about to leave university and need a financial boost. Unlike student loans, graduate loans are issued by regular high-street banks and work in the same way as unsecured personal loans. This means they gain commercial rates of interest and are paid back, like a conventional personal loan via monthly direct debit instalments over a fixed term.

Graduate loans are typically available for up to £15,000 with typical interest rates of between 8.9-11.9% APR. It’s not such a cheap way of borrowing as a student loan, so it’s a good idea to assess whether you really need one and compare the market for the best deals.

You should also consider your ability to pay, as unlike student loans, you’ll have to pay your monthly instalments no matter what your income is.

Advantages of graduate loans

  • you’ll usually be able to choose the repayment term from between six months and seven years
  • many banks offer a break between receiving the loan and the first payment, or a mid-term repayment holiday (but interest will be charged for this period)
  • some lenders offer same-day funds, so you’ll receive the money on the day of your application (although there may be an extra fee for this)

Disadvantages of graduate loans

  • commercial rates of interest rather than the inflation-linked student loan rate
  • you’ll normally have to hold a current account with the same bank to get a graduate loan
  • if you have a poor credit rating or are not earning, your application for a graduate loan may be refused
  • a graduate loan is a further debt to be paid back on top of existing student loans, credit cards and overdrafts