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Student loans and finance - how to pay for a degree

A student loan is a loan given to help fund university study and higher education. If you're studying in the UK, there are a number of different loans available, both private student loans and government backed companies.

Student loans and finance - how to pay for a degree

The loans available to you, depend on your course of study, your household income and personal circumstances.

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Student loans, finance and the COVID-19 effect

The Student Loans Company (SLC), which is owned by the UK government, provides student loans in the UK. It says that new and existing students in England and Wales can continue to apply for student finance as normal. The Student Loans company will continue to make payments including scheduled tuition fee payments as normal.

In March 2020 the customer contact centres were closed for a time due to COVID-19, but the SLC says that students can still apply for student finance as normal.

Students who are experiencing any difficulties in receiving their student loan payments should get in touch via their online account, the SLC says. They can also use their online account to make last minute changes to the course, university or college they have signed up to. 

Loans for first-time and undergraduate students

The loans you can get depend on your course of study, your household income and your personal circumstances.

You can apply for government backed loans from one of the four student finance agencies in the UK, if you are studying one of the following courses for the first time:

  • First Bachelors degree, eg BA, BSc or BEd

  • Foundation Degree

  • Certificate of Higher Education

  • Diploma of Higher Education (DipHE)

  • Higher National Certificate (HNC)

  • Higher National Diploma (HND)

  • Postgraduate Certificate of Education (PGCE)

  • Initial Teacher Training

Regardless of which of the four UK nations you intend to study in, your finance will be provided by the loan company in your home nation.

  • Student Loans Company (SLC) lends to students from England

  • Student Finance Northern Ireland (Student Finance NI) lends to students from Northern Ireland

  • Student Awards Agency Scotland (SAAS) lends to students from Scotland

  • Student Finance Wales (SFW) lends to students from Wales

These loans will cover your tuition fees in full and you can also apply for a maintenance loan to help cover your living expenses, the size of which will vary depending on your household income.

How do student loans work?

The loan that covers your course fees will be paid directly to your university or college. The maintenance loan to pay for your rent and living expenses will be deposited in your bank account at the start of each term.

These loans should only charge interest at the base rate to keep them in line with inflation.

Once you graduate and start earning over a certain amount each year, your repayments will be deducted from your salary in a similar method to income tax. If you are self-employed you will need to calculate your repayments as part of your tax returns.

There are no early repayment charges, if you want to repay some or all of your loan early.

Loans for tuition from private companies

If you're studying for a postgraduate qualification, for your second undergraduate degree or studying at a private college, you will need to fund the costs of the degree yourself.

If you don't have the money saved up to pay for this you have a few borrowing options. Whatever you decide, you should make sure you can afford the monthly costs of any loans you take out from private companies.

This is especially important if you plan to study full time and will see a drop in your income while you study.

What type of private student loan is suitable for me?

There are a number of options for private student loans in the UK and private student finance. It may be that you want to go back to college for a short term course, or you want to retrain, or you want to combine study with a full time job.

Find out what the options are for loans for tuition fees and private tuition fee loans in the UK if you don't qualify for a loan from the Student Loans Company, or you need a top-up for your existing loan.

Personal loans for students

Personal loans are unsecured, which means they are offered against your credit score, so to get the best rates or larger loans you will need to have a healthy credit report. It may be difficult to get a personal loan as student with no credit.

However, there are things you can do to improve your credit rating, such as making sure you are on the electoral register, not missing payments for credit, and using your credit card regularly but responsibility.

With a personal loan the monthly repayments are fixed and you will need to meet all of them to avoid default. The difference between a private personal loan and the government backed student loan is that you will still need to meet these repayments even if you're unemployed.

There are specialised loans for study available that offer repayment holidays, or reduced monthly repayments while you study. These are often called of "career development" or "personal development" loans, or simply student finance loans.

If you're considering either a specialist study loan or a personal loan, you do need to have a plan to repay the loan either via monthly instalments, or at the end of the term.

This might mean trying to make sure you have a job lined up, or enough cash in the bank, in order to afford the monthly repayments you will face upon graduating.

Student bank accounts with 0% overdrafts

A good student bank account with a decent 0% overdraft is one of the most useful financial products anyone studying full time can get.

An overdraft is where you are able to spend more money than you have in your account, allowing you into a negative balance up to a limit. If it is a '0% overdraft' this means you can effectively borrow for free.

Most student bank accounts should offer an 0% overdraft, but you will need make sure you apply to your bank to authorise it. Also you need to make sure that you do not spend over the limit you are given, otherwise fees and interest charges will apply.

Often a bank will give you an overdraft limit that will increase for each year of study (eg £1,000 in your first year, £2,000 in the second, £3,000 in your third year). You will also typically be given a few years after graduating to repay your overdraft before being charged interest.

Credit cards for students

Credit cards can help cover living costs but should be used carefully by full time students without a regular income.

It can be difficult for a typical full-time student to get a credit card, due to what would likely be a limited credit history and income.

credit-builder credit card could be useful to get while studying, as it can help build up a credit score ready when your graduate.

But, bear in mind most of these cards don't include any form of 0% interest period, so you will need to pay off your balance in full each month to avoid being charged interest.

If you do not think you can repay a credit card balance in full each month, it may be best to avoid getting a credit card as interest charges could soon add up and leave you out of pocket.

Grants, scholarships and other funding

There are a number of grants, scholarships and hardship funds available depending on your personal circumstances and financial background.

There are extra government allowances and grants to supplement your student loans if you have children, adult dependents, or if you're disabled.

In addition to the funds available from the government there are also many scholarships available at most universities which should be detailed on their websites and prospectuses.

If you are struggling to make ends meet, most universities should offer "hardship funds" to help you remain on your course if you are running out of money.

Postgraduate funding

There are seven government backed research councils that provide grants to fund postgraduate study and other university research work, these are:

  • Arts and Humanities Research Council (AHRC)

  • Biotechnology and Biological Sciences (BBSRC)

  • Engineering and Physical Sciences (EPSRC)

  • Economic and Social Research (ESRC)

  • Medical Research (MRC)

  • Natural Environment (NERC)

  • Science and Technology Facilities (STFC)

If you're thinking of applying for a Masters or PhD, you should check with your relevant research council to see what funding is available.

If you receive funding likely you will be able to cover the cost of your tuition as standard and get a stipend to cover your living costs.

There are many other funding bodies providing grants for postgraduate programs. So it's worth contacting the university you intend to study at and your course supervisor, who could help you apply for funding and direct you towards available grants.

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