Student Loans

It is almost impossible to go to university without taking out a student loan from the Student Loans Company (SLC), so the sooner you get it organised, the better.

Handling your finances at university is a serious issue. Most students are inexperienced at the realities of budgeting for themselves, and according to professional bodies many graduates end up with severe debt problems.

Q. Why do I need the money?

The loan is to cover your contribution to tuition fees and to help with living costs. These days the average student borrows around £12,000 to complete a university degree, and that’s money that most people can’t get from their parents and can’t raise by working in part-time jobs.

You should apply as soon as you receive an offer of a place at university because there is a fair amount of administration involved. And of course, because it is a loan, you will have to pay it back.

Q. How do I find out how much I will have to pay a university?

Get in touch with the university or college where you're hoping to study to find out the costs. Call them or look at their websites to get an idea of fees and average accommodation costs. The UCAS website at http://www.ucas.com has contact details for all universities.

Q. How much will I get?

The amount of money you will be able to borrow is assessed by your Local Education Authority (in Scotland this is done by the Students Awards Agency). It passes your details to the Student Loans Company, a government body which pays out the money and oversees the repayments.

There are two categories for the assessment - Dependent and Independent.

For dependent students, their parents’ income is taken into account to see if the parents must contribute to tuition or living costs. Independent students are those who are aged over 25 or who may have married, or who have no parents, or who have been funding themselves for three years or more.

The total amount you get depends on the LEA evaluation of your financial circumstances. Whatever your status, you are entitled to 75 per cent of the loan amount, but whether you get the full allocation is dependent on that LEA review.

For 2005/2006 the allowances are up to:

£4,195 for students in England and Wales
£5,175 for those living in London
£3,320 for those who live at home while studying

The money is paid to you directly by the Student Loans Company which transfers the payments into your bank or building society account, usually in instalments.

Q. What about paying it back?

You are meant to start paying back your loan in the April of the year after you graduate – but that only applies if you are in a job earning at least £15,000 a year. If you are in that fortunate position, 9% of your earnings will be deducted each month directly from your pay cheque. If you are not earning that amount, you will not make any payments until you do reach that salary.

Q. Presumably if it is a loan, someone is charging interest on it?

Correct. The interest rate is always based on the rate of inflation and yes, interest is added every month. And if you do two higher education courses, and take out two loans, you pay them both back at the same time and there is interest on both.

However, the interest late from the Student Loans Company is cheaper than you would get from a commercial organisation like a bank or building society.

Q. How do I apply?

Get an application form from your local education authority or you can find them online at: http://www.studentsupportdirect.co.uk

Q. Are there any alternatives?

A large number of companies and some industries offer scholarships and sponsorships which can fund students throughout their university life. In most cases this means that in return you agree to work for that company when you finish your studies. To see what might be available, visit http://www.scholarship-search.org.uk/

A version of the same software also runs on the National Union of Students website http://www.nusonline.co.uk and gives a database for searching out funding options, loan calculators, and budget planning guides.

Q. Where can I learn more?

For more information:

Students in England and Wales – http://www.studentsupportdirect.co.uk
Students in Scotland - http://www.student-support-saas.gov.uk
Students in Northern Ireland should contact their local education authority.