Student Finance Explained
Student finance can be confusing and has many myths surrounding it. In this guide, we break down student finance, explain how much money you can expect to get and how you can apply for student finance.
What is Student Finance?
Student Finance is funded by the government and allows students from all financial backgrounds to be able to go to university. Student finance includes non-repayable grants and loans (which are repaid).
The repayable loan part of Student Finance includes a Tuition Fee Loan and a Maintenance Loan to cover living costs.
What is a Student Loan?
A Student Loan covers your university tuition fees and living costs with the Maintenance Loan. Student Loans are repayable once you’re earning a certain amount of money. The loan accrues around 2.6% - 5.6% interest each year until it’s completely repaid.
But don’t let that scare you! Student Loans are written off after 30 years and 83% of graduates never fully repay the loan. For more information on repaying your student loan, read our guide.
What’s the difference between Student Finance and Student Loans?
Student Finance encompasses both grants and loans given to students going to university. Student Finance is the governing body you apply to in order to receive your loan. The Student Loan is an aspect of Student Finance and so there isn’t much of a difference, oftentimes the words are used interchangeably.
If you apply for Student Finance, then you’ll be receiving a Student Loan.
How do Student Loans work?
Student Loans work by providing two main loans - one to cover the university tuition fees and one to cover your living costs.
This means that you won’t have to pay anything upfront to go to university and students from all backgrounds will be able to attend.
The Maintenance Loan covers your living costs at university. However, this often isn’t enough for students to live on. Parents are expected to pay towards living expenses but this isn’t made clear upon application.
When you apply for Student Finance, you’ll have to share information about your course and household income. This will determine the size of the loan you’ll receive.
What does student finance cover?
Student Finance covers the cost of your university course (up to £9,250 a year) and your living expenses. Let’s take a look at these in more detail:
What are Tuition Fee loans?
Universities can charge up to £9,250 a year in tuition fees. The Tuition Fee Loan covers these fees so you don’t have to pay a penny upfront. You’ll only repay the Tuition Fees once you’ve graduated and are earning over a certain amount.
This Tuition Fee Loan goes straight to your university so you’ll never receive this money directly.
Borrowing such a large amount of money to cover course fees might seem intimidating but don’t let it dictate what university course you choose. You’ll only start to repay these Tuition Fees once you’re earning a certain amount. Read our guide on repaying student loans for more information.
What are Maintenance Loans?
The Maintenance Loan is the second part of your Student Loan. The Maintenance Loan is designed to cover university living costs such as accommodation, food, bills and more. It works in the same way as the Tuition Fee Loan, you’ll only start repaying the Maintenance Loan once you’re earning a certain amount.
The size of your Maintenance Loan depends on the location of your university and your household (parent’s) income. The smaller your household income is, the higher Maintenance Loan you’ll be offered.
Here are Maintenance Loan levels in England for 2020/21:
|Household Income||Living at Home||Away from Home||Away from Home|
How much does university cost?
University costs thousands of pounds but the majority of the expense is covered by Student Finance. This means that you won’t have to pay a large amount of money upfront and will gradually pay it back once you’re earning a certain amount.
How much are tuition fees in England?
The maximum amount universities can charge undergraduates in England per year is £9,250. Remember, this is the most you’ll be charged. Fees may vary depending on what course you take.
Tuition Fees pay for the following:
- Services and facilities
- Hardship funds
You can check what a university spends its course fees on and pick one that benefits you the most.
It isn’t worth your time shopping around for cheaper university fees as most universities will charge the maximum - £9,250 per year.
Instead, you should compare the costs of rent, food and transport at the different university locations to find out which is more affordable for you.
What else do students have to pay for?
There are other costs you need to consider when budgeting for university. These include:
- Course books and stationery
- Student laptop
- Household bills
- Social events
For more information on budgeting, read our guide on student living costs.
Can I afford university?
Whether you can afford university or not depends on your circumstances. Student Finance aims to make it possible for students from all backgrounds to attend university. However, the Maintenance Loan isn’t always enough to cover university living costs and many students require extra income in the form of a part-time job or from their parents.
So, university being affordable can sometimes depend on your personal circumstances as Student Finance might not always be enough.
How much Student Finance will I get?
The Tuition Fee aspect of Student Finance will cover your entire university course fees - up to £9,250 a year.
The maximum Maintenance Loan you can receive is £9,203 (more if you’re living in London). Most students won’t receive the maximum amount because their total household income is higher. You can use our table above to work out how much you’ll roughly receive in your Maintenance Loan.
A key thing to keep in mind when considering your Maintenance Loan is the hidden parental contribution calculation.
Maintenance Loans are means-tested which means that the amount you get depends on your household income. For under 25s this is your parent’s income.
So, the parental contribution part of the loan is calculated as:
Full Maintenance Loan (£9,203) - Maintenance Loan received based on parental income = expected parental contribution
For example, your parents might have a combined income of £50,000. This means that your Maintenance Loan will be a maximum of around £5,905. So, let’s work out the parental contribution:
£9,203 - £5,905 = £3,298
So, your parents will be expected to give you an additional £3,298 to help with your living costs.
The problem with Maintenance Loans is that parents are expected to contribute but are never told this. When you apply for Student Finance, you’ll only be told what Maintenance Loan you’ll receive but not how much is missing.
Having a too small Maintenance Loan is the biggest problem university students face. Which is why parents are expected to contribute towards their child’s expenses.
The more your parents earn, the smaller the Maintenance Loan you’ll receive and the more your parents are expected to contribute.
This is why parents need to start saving for their children’s university living costs, even when their kids are still very young.
If your parents or guardians are unable or refuse to contribute, then you will probably have to get a student job (see our guide on The Best Websites for Student Jobs).
Who can get student finance?
To be eligible for Student Finance, you need to meet the following criteria:
- You’re a UK citizen or have ‘settled’ status.
- You’ve been living in the UK for at least three years before the start of your course.
- You’re applying for a recognised university or college course.
- You’re under the age of 60 on the first day of your course.
What extra funding is available other than Student Finance?
Universities offer scholarships, fee waivers and hardship funds. If your household income is less than £25,000 a year then your university might offer you a bursary. You can enquire about these directly to your specific university.
Some charities, companies and councils also might offer financial aid, you need to reach out to as many people as possible if you require extra funding.
University funding for parents and carers
If you’re responsible for looking after someone else during your university course, you could be eligible for extra funding. The exact payout depends on your household income but it is non-repayable.
Here are the different types of funding for parents and carers:
- Parents’ Learning Allowance - gives money to students with dependent children.
- Childcare Grant - helps to pay for a childminder, nursery and other childcare-related fees.
- Adult Dependants’ Grant - provides financial support if you’re responsible for another adult.
If you’re unsure whether you’re eligible for any of the above student funding, click on the links to find out more.
Disabled Students Allowance (DSA)
If you have a disability that creates extra costs while studying then you could receive Disabled Students Allowance (DSA). A ‘disability’ could be any of the following:
- Mental health issues.
- Unseen conditions. For example, epilepsy.
- Learning difficulties.
- Long-term physical disabilities.
You’ll either need to provide evidence or be assessed to receive DSA. If accepted, you can receive funding for specialist equipment, a non-medical helper, general allowance and travel expenses.
When should I apply for Student Finance?
You can apply for Student Finance the spring before your university course starts. You don’t even need a confirmed university place so it’s worth doing early for prompt payment at the start of your university term.
It’s best to get your paperwork together and apply as early as you can to avoid a last-minute panic. It can take up to six weeks for your application to be processed. We recommend having Student Finance confirmed by the end of May. To be safe, apply at the beginning of March.
Don’t worry if you miss the deadline - you can apply up to nine months after starting university but you’ll have to pay for any fees and provide your own funding until you receive the Student Loan.
New students should apply before 21st May to get money in time for the start of the course.
Continuing students should apply before 25th June.
Remember - you need to reapply for Student Finance funding each year of your university course.
How do I apply for Student Finance?
You can apply for Student Finance online via the government website. You’ll be redirected to the relevant Student Finance body for your country - i.e. Student Finance England.
You’ll then either need to sign in or create an account, depending on whether you’re applying for Student Finance for the first time or not.
For the Maintenance Loan, your parents will have to provide information about their household income and provide evidence. They must fill it in based on their income in the 2019/2020 tax year. However, if your parents 2021/22 income is likely to be 15%+ lower then you can ask for a current year assessment.
Remember, you need to reapply for Student Finance each year of your course. If your circumstances change throughout the year, this will be reflected in your Student Loan.
How to contact Student Finance
If you want to apply for Student Finance, find out more, ask questions or find out how much money you could get, use the relevant contact information for your location below:
|England||0300 100 0607||Student Finance England||@SF_England|
|Northern Ireland||0300 100 0077||Student Finance Northern Ireland||N/A|
|Scotland||0300 555 0505||Student Awards Agency Scotland||@saastweet|
|Wales||0300 200 4050||Student Finance Wales||@SF_Wales|
9 Things you need to know about Student Finance
Before signing a Student Finance agreement, there are a few things you need to know. Many of these things are mythbusting as there’s a lot of misinformation surrounding Student Loans:
#1: You don’t need to have the money to pay for university
The idea of being £50,000 in debt puts many students off going to university. However, this isn’t relevant. What’s important is how much you’ll have to repay, which is different from the £50,000 price tag.
What you repay depends on how much you earn after graduating. People who earn a lot after university will repay more of their Student Loan. People who don’t earn as much won’t repay as much.
You don’t need to pay anything upfront to attend university (as long as you apply for Student Finance in time). However, parents might be expected to help pay for your living expenses as the Maintenance Loan isn’t always enough. This is one thing to bear in mind.
#2: Student Loans are not debt
Student Loans act more like tax than they do debt. Just take a look at the following facts:
- Student Loans are repaid through income tax on your payslip.
- You only repay if you earn over a certain amount.
- The amount you repay increases with your earnings.
- It won’t go on your credit report.
- Debt collectors don’t chase Student Loans.
- Having a larger Student Loan won’t increase the payments.
- Most people will continue to repay their Student Loan for their entire working life (most never completely repay it!)
#3: Student loans DON'T go on your credit file
Whenever you borrow money on a credit card, a loan or mortgage, the bank will check your credit files. Thankfully, Student Loans won’t appear on your credit file. The only way these loan providers will find out is if they directly ask you.
Large loans such as mortgages might ask you whether you’re repaying your Student Loan. This is because it’ll impact how much disposable income you have each month. Therefore, you might be offered a slightly smaller mortgage because of it.
#4: Watch out for the hidden parental contribution
This is very important - Maintenance Loans are means-tested. This means how much you get is based on your parent’s income.
The less your parents earn, the higher Maintenance Loan you’ll receive.
If your parents are high earners, you’ll be offered a smaller Maintenance Loan. Your parents are then expected to contribute for you to have enough money to cover living expenses.
Of course, your parents aren’t forced to contribute and if they can’t afford to then you’ll have to apply for financial help at the university or find a part-time job.
#5: Student Finance debt is wiped after 30 years
If, after 30 years, you haven’t repaid your Student Loan, then it’ll automatically be wiped. This is why some people never repay a penny of their Student Loan - if you never earn enough to start repaying, then you’ll never have to repay.
The vast majority of students never fully repay their Student Loan.
#6: Interest is added to your Student Loan
Just like when you normally borrow money, interest will be added to the total balance of your Student Loan.
On average, interest can range from 2.6% - 5.6%.
Added interest does mean that you’ll owe more but it doesn’t impact the cost of your monthly Student Loan repayments.
This interest means it’ll take longer to repay your Student Loan but many people will never fully repay anyway.
#7: Repaying your Student Loan early could be costly
If you’re earning a lot of money, it can be tempting to pay off part of your Student Loan early to cut down the debt.
However, this money will be best spent on investments or properties or simply put into a savings account. If you’re not earning a lot, then repaying early could end up being costly. It’s best to let the loan run its course.
#8: Terms aren’t set in stone
Be aware that Student Loan terms can be changed even after you’ve signed the contract. For example, the earnings threshold or the loan being wiped after 30 years could be amended or even dropped.
For example, the government once tried to backtrack on their promise to increase the salary threshold to reduce the pressure on repayments. However, after many campaigners, they did stick to their original promise.
Whilst huge changes are unlikely, it’s important to be aware that it could happen.
#9: You might have to repay grants if you drop out of university
University isn’t for everyone and sometimes personal problems might mean that you have to drop out early. However, don’t do this until you’ve spoken to the Student Finance team.
Sometimes, you might be expected to pay back non-repayable funds such as grants and bursaries. You might also struggle to get Student Finance in the future if you drop out.