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Student finance: What you need to know

As a student you can apply for tuition fee and maintenance loans to pay for course fees and help towards your living costs. Depending on where you live in the UK, where you want to study and your personal circumstances, you may be eligible for a grant and/or bursary too.

Student Loans

  • Student loans were introduced for people entering university from 1990.
  • Repayments are not made whilst you are studying with repayment starting after you graduate subject to the level of your earnings.
  • Repayments commence once your earnings exceed a certain amount depending upon when you took out your loan
  • Payments continue either until the loan is repaid in full or 'wiped out' (25 years following the April after you graduate if loan taken out before 2012, or 30 years if loan taken out after 2012.)
  • Deductions are made by your employer and paid direct to HMRC.
  • HMRC then pays this amount to the Student Loans Company (SLC) annually in March.
  • Interest is added to your loan with the interest rate set each September based on the previous March’s RPI (Retail Price Index) plus 3%.
  • Current rate after graduation is 2.6% to 5.6%. Rate increases based upon earnings. Increases on a sliding scale. Where income is £27,295 or less then 2.6% rising on a sliding scale up to , 5.6% once earnings reach £49,130.
  • From 1 September 2020 until 31 August 2021, the interest rate for borrowers in England taking out a Postgraduate Masters or a Doctoral loan will be 5.6% (RPI + 3%). The repayment threshold for Postgraduate loans continues to be £21,000

Planning Points

  • The more you earn the more of the loan you will repay – so reducing your salary by Salary Sacrifice will reduce the loan repayment amount
  • The interest rate changes every September — it will be 5.6% for the academic year (Post Graduation Loan).
  • The interest rate doesn't determine what you repay each year — that's linked to how much you earn.
  • The loan will be wiped out after 30 years regardless of what you have paid back. Sacrificing salary benefits may mean that the amount you must repay yourself reduces. This can extend the overall time taken to repay the loan if you are making repayments yourself and earn enough to do so. HOWEVER, if you are unlikely to repay the loan before it is due to be wiped out this could be financially advantageous.
  • Only consider overpaying if you will repay more than the interest you will be charged each year, otherwise it will make no difference to any outstanding debt you may have.
  • To clear the debt and accrued interest within 30 years you would need to be earning c.£40k+ per annum. If you're in this category, then overpaying could be a worthwhile consideration.
  • The Student Loans Company will set up a direct debit arrangement with you when you are expected to repay your loan within 12 months in order to avoid you overpaying the balance of the loan.
  • Student Loans are not recorded on your Credit File so have no impact on your credit score, however it could affect any mortgage application on "affordability"

Find out more on Money advice site

https://www.moneyadviceservice.org.uk/en

The content of this article does not constitute individual financial advice.

Students from the Guernsey are not eligible for a loan from the UK Student Loans Company.

Guernsey offers higher education students a grant to help with the costs of tuition fees, living and travel. The amount of funding available depends on a number of factors, including an assessment of your parent’s income. Bursaries are also available for independent students who have no support from parental contributions.

The funding is available to full-time students taking undergraduate level courses in the UK but funding may also be available if ou want to study outside of the UK or take a postgraduate course.

Where possible, Guernsey negotiates more favourable tuition fees with UK academic institutions than other international students would pay. However, the agreements vary from institution to institution, and if your course started in 2012 or later, some institutions may insist on higher fees than your grant or bursary will cover. In this case, you or your parents may be charged the balance.

Students from the Isle of man are not eligible for a loan from the UK Student Loans Company.

All students commencing an off-Island undergraduate or postgraduate degree course are now required to pay a Tuition Fee Contribution of £2,500 per year towards the tuition fees charged by the university. The IoM offers a loan facility which is available to all students who are required to pay this contribution. A Tuition Fee Loan will have to be applied for each year. Even if you have an existing loan agreement, you will need to apply for an additional loan for each year of your course, although this is simply a matter of ticking the box on your Continuing Student Award application form. If you have signed a loan agreement in a previous year, the additional loan amount will automatically be added to your loan account.

Support under the Student Awards Regulations is only available to students meeting the required criteria in terms of residency, academic qualifications and age. Also, the course you intend to study must be an approved course. You would need to satisfy the requirements in each of these areas to qualify. The qualifications can be found here: https://www.gov.im/categories/education-training-and-careers/student-awards/eligibility-for-grantsloans/

Repayment: Repayments will become due on 1st July of the year after you finish studying, subject to your gross annual income being a minimum of £25,000 (“the Earnings Threshold”).