If you, or a son or daughter are heading off to university in September, you may need a quick course in student loans.
Understanding how student loans work, the repayment process, and the impact on future finances is critical for making decisions about financial arrangements you need now.
What does a university course cost?
University tuition fees in England and Wales have risen to £9,535 per year. But they are only the beginning of the costs involved. Accommodation, subsistence and study materials will all need to be paid for.
The Higher Education Policy Institute (HEPI) has said students need £61,000 over the course of a three-year degree in order to have a “minimum socially acceptable standard of living. This is on top of the £9,535 per year tuition fee. In London, that figure is £77,000.
Coming away with a degree is a great start for a career and for adult life. £77,000 of debt isn’t.
Fortunately, student loans exist to make that debt much easier to deal with.
What Are Student Loans?
Student loans are provided by the government, specifically designed to help students cover these costs. There are actually two types of loan: Tuition Fee Loans and Maintenance Loans.
- Tuition Fee Loans are paid directly to the university or college, ensuring that students are not burdened with managing these expenses themselves.
- Maintenance Loans help cover living expenses, such as rent, food and transport. The amount depends on factors such as family income, whether the student lives at home or in the university town, and where the university is located. For example, students studying in London may receive a higher Maintenance Loan because of the city’s elevated cost of living.
How do you get a student loan?
Fortunately, applying for a student loan is straightforward. As long as the student is a UK resident or meets certain residency criteria and preparing for an eligible course at an approved university or college, simply go online to the appropriate regional student finance site. Then it’s just a matter of creating an account and providing some information. You’ll need a passport or birth certificate as proof of identity, National Insurance number, details of household income and course and university details.
Once your application has been processed, you’ll receive a letter or email with details of how much student finance you’re entitled to. Tuition Fee Loans are paid directly to the university. Maintenance Loans are paid into your bank account at the start of each term.
Repayments
Unlike traditional loans, student loan repayments are not required immediately you leave education. Instead, they begin only after the borrower earns above a certain income threshold. For undergraduate courses started this year, repayments will begin when income exceeds £25,000 per year.
Repayments are calculated as a percentage of income above the threshold, typically 9%, meaning they are more like an additional tax than a conventional loan payment.
Student loans in the UK are not lifelong debts. . Student loan debt is written off between 25 and 40 years or when you reach 65, depending which plan you’re on.
The problem as with any debt is interest, which is variable, the interest charged will depend upon which plan you are on. This can become a trap for those on an income high enough to make repayments, but not high enough to pay off the debt.
Is it a good deal?
The student loan system provides access to university without upfront costs. However, it does mean being saddled with a large debt, and while the repayment system means many will not repay the full amount, student loan repayments will have to be factored into financial planning.
It means that there could be several years of repayments acting like an extra tax at a time when people are starting out on their financial journey. Having a large student debt should not affect credit rating, but it will have an impact on available income
Mortgages in particular could be affected by an outstanding loan debt.
If you – or your children – have student debt to deal with, it could be worth getting an independent view from a financial adviser. In some circumstances it might be worth paying them off early. The effects on borrowing, tax and financial planning all need to be considered.
Simply call us at Continuum.
Student living costs in the UK 2025 – Save the Student
How much are tuition fees in the UK and is university worth it? – BBC News
UK Student Loans Explained for 2025/26
Repaying your student loan: when and how much you pay back – Which?
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate debt management and some aspects of secured and unsecured loans.
Your home may be repossessed if you do not keep up repayments on your mortgage.
