Student debt explained
Thinking about college or university butÂ terrified of allÂ thatÂ student loanÂ debt?Â Find out moreÂ so you can make an informedÂ decision thatâs right for you.
Whatâs available to help me pay for university?
Thereâs no getting away from it âÂ unless you were born in a castle, youâre going to have toÂ borrow money to go to uni.Â The main options are:
- Tuition fee loanÂ â pays yourÂ fees.
- Maintenance loanÂ â helps pay for yourÂ livingÂ costs.
- Interest free overdraftÂ âÂ forÂ emergencies, only if youâve agreed it with your bank though!Â (scroll down for more on overdrafts).
CheckÂ â do you qualify for free money?
If your family income is lowÂ you might qualify for grants or bursaries â you donât have to pay these back.Â CheckÂ Turn2UsÂ andÂ Scholarship SearchÂ or ask Student Finance at your university.Â Youâll also be eligible for extra money if you areÂ a parent,Â a carerÂ or if youÂ have a disability.
If youâreÂ WelshÂ orÂ fromÂ Northern IrelandÂ you can usually get some of your maintenance loan as a grant. If youâreÂ ScottishÂ the government will pay your tuition fees too.
How do I pay back my student loans?Â
You donât startÂ student loanÂ repayments until youâve finished your courseÂ andÂ youâre earning over Â£21,000 a year (the repayment threshold). Then you pay 9% of anything you earn over Â£21,000.
So, for example, if you earn Â£23,000 that means you earn Â£2000 more than the threshold â so you would pay 9% of Â£2000Â over a year, or around Â£180 a year (Â£15 a month).
If you take on extra shifts, work overtime or your hours go up, this meansÂ youâllÂ pay a bit moreÂ eachÂ month â but if your hours drop, so will your repayments.
What if I canât find a job?
The idea is that you only pay when you can afford to. So you donât make repayments if you canât find a job, lose your job or if youâre ever earning less than Â£21,000 a year.
Some good and bad things aboutÂ student loan debt:Â
- It wonâtÂ make it harder to borrow more in the future – it doesnât affect yourÂ credit rating.
- It wonâtÂ be a hassle to pay â it comes out of your salary before you see it.
- You wonâtÂ ever be faced with a lump sum to pay.
- You wonâtÂ have to pay it back when youâre unemployed or not earning much.
- It willÂ mean that your monthly repayments go up as you earn more.
- You willÂ have interest added to the total debt each month.
- You willÂ probably have to pay your loan back even if you drop out of your course.
What aboutÂ anÂ âinterest-freeâ overdraft?
Banks often offer students interest freeÂ overdraftsÂ – which means you have a bit of extra money as a safety net if you have a big expense, like having to travel home at short notice.
Beware that when you graduate, youâll have to start paying interest â which could be a real shock if youâre not earning yet.Â Shop around to get the bestÂ graduate bank account deals.
And whatever you do, make sure you are using an AGREED overdraft. If you go overdrawn without agreeing it first, youâll be charged.
Help with college feesÂ under 18
EducationÂ is freeÂ if youâre under 18. But there are some grants to help with travel and other costs.
- Education Maintenance AllowanceÂ (EMA) (in Wales, Scotland and Northern Ireland)
- 16-19 Bursary FundÂ (in the UK)
- Care to LearnÂ (for parents under 20)
- OtherÂ grants and bursariesÂ depending on your situation
None of these need paying back.
Help with further education fees over 18
YouâreÂ looking at a loan, though there are someÂ grants and bursariesÂ available.
- AnÂ Advanced Learner LoanÂ isÂ similar to aÂ tuition fee or maintenance loan, and is paid back in the same way.
- AÂ CareerÂ Development LoanÂ is a bank loan,Â although theÂ interest is slightly less.Â You have to start paying it back one month after you finish your course, whether youâre earning or not.
ButÂ my granny said I should never get intoÂ debt!Â
And thatâs good advice, to a point.Â But thereâs aÂ massiveÂ difference between good debts (debts thatÂ help you move on inÂ life and are easy to manage) and bad debts (debts thatÂ have huge levels of interestÂ orÂ were caused by buying stuffÂ you donât need).Â See our article about good and bad debt for moreÂ information.
Tuition, maintenance and advanced learner loans totallyÂ tick theÂ âgoodÂ debtâ box.Â If it helps, look at themÂ more like tax than a debt.
IâmÂ stillÂ not sure university isÂ worth itÂ
Try not to let the debt stress you out orÂ be the only reason you decide not to become a student.Â On the other hand,Â if you know deep down that university is not for you, donât worry -Â there are lots ofÂ other options.