Student loans aren't just for students. You can also get support if you're pursuing a master's degree.
This is known as a Postgraduate Master's Loan and covers course fees and living costs. The support is worth £12,471 if your course started on or after 1 August 2024.
Someone taking up the full student finance offered, so £9,250 in tuition fee loan and £13,348 in maintenance support, would leave university with debt starting at £67,794 (excluding interest).
That's a scary amount for someone to start their working life with. But unlike a traditional loan, the money is does not necessarily have to be repaid immediately and in some cases you don't pay it back at all.
Repayments are not due until April after a student graduates and once the amount earned exceeds a certain threshold, depending on when and where the student began their education.
For example, students who went to university in England between 1 September 2012 and 31 July 2023 will be given 'Plan 2' student loans. Under these plans, repayments only begin when the student earns more than £27,295, and any remaining loan is written off after 30 years.
The threshold has been lowered for anyone starting a degree in 2023 under the new “Plan 5” student loans. Repayments will begin once a student earns more than £25,000, and the loan will not be written off until 40 years have passed.
Repayments are based only on the portion of your salary that is above the earning threshold and the money is usually taken directly from your payslip, unless you are self-employed. In that case, you repay via a income tax return.
Many people will never earn enough to pay back the loan in full and there is no pressure to do so. However, you should be aware that the amount of student debt is taken into account by banks when applying for other financing, such as a mortgage. This can therefore affect how much you can borrow in the future.
This creates a dilemma for parents, as you may want to help your child avoid being saddled with student debt due to pay their tuition fees in advanceOn the other hand, they can learn valuable financial life lessons about managing a budget and may never have to pay back the debt.
Interest is added to student loans at different rates depending on the plan you have. Unlike conventional loans, you don’t have to pay the money back right away, but interest is added once the money is disbursed.
The amount of interest charged also depends on when the loan was taken out. This is set at the start of each academic year based on the retail prices index (RPI) figure for the previous March.
For Plan 2 student loans, the interest charged during your studies is based on the RPI plus 3 percentage points.
Anyone earning below the £27,295 threshold after completing their degree will only have interest added at RPI. The interest charged once a graduate earns more than the threshold increases by RPI plus 3 percentage points until they earn £49,130, when it is capped.
Students with new Plan 5 loans will be charged interest in line with the RPI. That means lower interest rates, but repayments start sooner, as the income threshold is now £25,000.
To receive the student loan, you will need to open a bank account. Student accounts usually offer useful benefits.
From interest-free overdrafts and cashback to train tickets and even a subscription to a meditation app: there are countless free extras to be had.