Is your son or daughter thinking of applying for uni? If so, here's everything you need to know about student finance in England.
If your child is considering going to university, it can be difficult not to worry about the financial impact this decision could have.
Student finance can seem a bit of a minefield, especially when you haven’t attended university yourself. Here’s our handy guide to student finance for all you parents wondering what you and your child are letting yourselves in for. (It’s not as bad as you might think, we promise!)
How does a student loan work?
An application is made through Student Finance England (SFE) online, and all student loans in England are administered by Student Loans Company (SLC). They provide two types of loan:
Tuition fee loan: Up to £9,250 a year. This is paid directly to the university.
Maintenance loan: Up to £8,944 a year (or £11,672 for those living in London but away from home). This covers the cost of living (rent, food, etc.) and goes directly into the student’s bank account at scheduled points throughout the year.
The amount of maintenance loan a student receives depends on several factors. Those studying and living in London will be entitled to more, as the cost of living is higher; however, students opting to live at home while studying won’t be entitled to as much as those moving out of their family home. Household income also affects how much maintenance loan a student can receive, as a portion of the loan is means-tested. You can find out more about this below.
Top Tip: It’s not compulsory to borrow the maximum amount of money offered.
What does ‘means-tested’ student finance mean?
Means-tested student finance requires a student to submit details of their household income so that maintenance support can be provided where necessary. A portion of maintenance support (35%) is calculated depending on income, so the higher your household income, the less maintenance support your child will be given.
If you’re happy for Student Finance England to share your income information with your child’s university choices, they will also be able to inform you of any further funding your child could be eligible for, including scholarships and bursaries.
How do I support my child’s student finance application?
When your child submits their application, you will receive an email prompting you to make your own account on the Student Finance England website. Once you’ve created your account, you’ll need to log in and enter your income details.
Once you submit your details, this will be checked with HMRC, and if the details don’t match, you’ll be asked to provide evidence of your income. Remember, this is your information as an individual – if you have a partner, they’ll provide their details separately.
Photocopies of evidence should be sent as soon as possible, as it can take up to six weeks to process applications. Evidence could include a P60 or recent payslips. If you’re divorced or separated, you may also be asked for proof of this.
If accepted, your child will receive a letter stating their entitlement.
When would my child need to start paying back their loan?
Any home or EU student who studies/studied in the UK on or after 1 September 2012 will only start repaying their loan once their annual income is £2,214 a month or more before tax, no earlier than the April after they graduate. (Applicable to anyone on the post-2012 repayment plan 2.)
Student loan repayments are organised automatically through HMRC, and are taken directly from the graduate’s monthly salary - just like National Insurance and income tax payments.
For detailed information on repaying student loans, visit the Government webpage.
Will the loan accrue interest?
A student loan starts accruing interest from the day a student takes it out. While studies are ongoing, the interest rate will be 3% above the Retail Price Index (RPI) - a measure of inflation.
Once a student graduates, their interest rate will depend on their income:
- Earning £26,575 or less – RPI
- Earning £26,575 to £47,835 - RPI plus up to 3%
- Earning over £47,835 - RPI plus 3%
If a student loses touch with the Student Loans Company, they will be charged RPI + 3%, irrespective of how much money they're earning.
(Note: the information in this section was taken from the Government website in August 2019).
Does a student loan ever get written off?
This may surprise you, but many people will never clear their entire student loan. If a graduate doesn’t manage to pay off their loan and its interest within 30 years, their remaining balance will be written off.
Should I consider paying my child’s fees upfront?
Paying university fees upfront isn’t common and it’s certainly not necessary to take out a personal loan to cover your child’s tuition fees. In fact, this wouldn’t make financial sense, as student loan interest rates remain lower than most other loans on the market and they get written off after a set amount of time anyway! (See above).
Don’t forget, your child’s tuition fee loan will go directly to their university, so this also saves you the worry of making payments on time.
Could a student loan count against my child in the future?
If you’re worried that having a student loan could affect your child’s ability to borrow money in the future, the likelihood is, it probably won’t. Student loans don’t go on credit files and generally, they don’t count against you when you’re applying for a mortgage.
If student loan repayments have a big impact on take-home pay, this can affect affordability checks when it comes to securing a mortgage. However, as repayments are relative to the salary earned, anyone paying back large amounts of student loan each month would probably be earning enough not to be affected by this knock to their take-home pay, anyway.
I’m interested in studying. Could I get a student loan as a mature learner?
Anyone aged 21 and over is classed as a mature student, and age doesn’t affect your ability to apply for student finance to fund your tuition fees.
Anyone aged over 60 on the first day of their first academic year isn’t eligible to apply for a maintenance loan; if you’re below 60, you’re able to apply and will be assessed based on the same criteria as a typical university student (e.g. household income).
Postgraduate tuition fee loans are also available, and in some circumstances you can apply for a fee loan for a second undergraduate degree.
If you are considering studying for a degree yourself, opting for Blended Learning with Arden University could help you fit your degree around your existing commitments – plus, you could still be eligible for both a tuition fee and a maintenance loan.
Please note that information in this article was accurate as of May 2020.