student finance for university
Student Finance

How student finance works

Achieving a degree is becoming increasingly difficult thanks to ever-rising tuition fees. Luckily, most students are eligible to pay for their qualification with a student loan, although many worry about starting off their life with a debt burden (especially with their American counterparts becoming overwhelmed by debt). It would make it a lot easier for students to accept the money from a student loan if they could think about the repayments as a form of graduate tax, rather than as an outstanding debt. To see it this way, however, they really need to understand how student finance works. In this article, we’ll take a more in-depth look at student loans.

How to apply

Everyone who hasn’t already studied at university level is eligible to apply for a student loan. To start the application, you will need to go directly to the Student Loans Company. There are two types of loan available: the maintenance loan, which covers your living costs and the tuition fee loan, which pays for the course. The maximum amounts for each respectively is £11,354 and £9,250 per year.

Repayment

Repayments on your student finance begin from the 6th April following your graduation: you won’t need to do anything as repayments are deducted directly through the PAYE tax system and will be handled by your employer. Repayments will only start when you earn over £25,000 per annum, although repayment thresholds are lower for those who started their course before 1st September 2012, and they will start repaying when their income is over £18,330. Each month you will repay 9% of any earnings that you earn over and above the repayment threshold. For example, if you earn £30,000 per annum and started your course after 1st September 2012, your repayments will be 9% of £5,000 on an annual basis, which works out at £450, or £37.50 a month.

Can you overpay to clear your debt?

Given that student loan debt accrues interest, many people decide to try and pay off their loan more quickly, in order to clear the burden as quickly as possible. If you wish to make extra repayments, you need to go directly to the Student Loans Company. Paying your loan off in this way won’t stop payments being taken directly from your salary but it will help you to pay the loan off quicker. Debt relating to student loans, however, is written off 30 years after you started repaying it or if you become permanently disabled. It is worth, considering, therefore, if any money you plan to use to pay off your debt early could be better used elsewhere – you could save money!

It can be scary to add up all the costs of gaining a degree and to think about it as a debt that you will carry around with you. Thinking of your repayments as a form of tax rather than as a debt repayment can make the prospect of going to university feel a lot easier.


Written by Laura Vieira


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