Student finance: what you need to know

A big shakeup of the student loan system will see many new undergraduates in England paying much more for their university education. Find out what the changes are and how they will affect you.

If you are starting university for the first time this autumn and taking out a student loan to help pay for it, you will have to begin repaying that loan sooner and over a longer period of time than has been the case until recently.

Under the new ‘Plan 5’ system, interest will also accrue at a lower rate, using just the level of RPI inflation rather than RPI plus 3%.

In this article we look at:

• How does student finance work?
• Who’s eligible for student finance?
• How much maintenance loan will I get?
• What is the deadline to apply for student finance?
• What are the different types of student loan?
• Should you pay off your student loan early?

Read more: The three big changes happening to student finance this year

How much does university cost?

While university may well be the best time of your life, but it will likely also be one of the most expensive.

How much it really costs to study will cost you depends on a number of factors, including:

• The cost of your tuition fees
• Where you study – London is more expensive than other areas around the country so you might be entitled to a larger maintenance loan
• Where you decide to live – staying at home will cut down on costs
• Your lifestyle choices – being careful with your money will significantly reduce your costs (read our guide to budgeting)

How much are tuition fees?

Tuition fees vary depending on the university you go to and where it’s located in the UK.

There are limits on what universities can charge, here are the costs for the 2023/24 tax year.

Location of university	Maximum fees
England	£9,250
Wales	£9,000
Northern Ireland	£4,710
Scotland	Free for Scots or EU citizens but £9,250 for students from rest of UK

How does student finance work?

Student finance is money that you borrow from the government to help pay for tuition fees and living costs.

A student loan is split into two parts: one for tuition and another that covers maintenance costs. They are both repayable.

Remember that while these two loans are paid out separately, you eventually repay them as one student loan.

However, they are considered two separate forms of student financing and the borrowing limits are assessed differently:

1. Tuition fees

This part of the loan will cover any amount up to the full amount you are charged for tuition fees (up to £9,250).

It is paid directly to your university and not into your bank account, so you don’t see this money.

2. Maintenance loan

This money is paid directly into your bank account to help pay for living costs, such as food, accommodation and books while you’re studying.

The loan is paid into your bank account in three instalments at the start of every term.

Unlike the tuition loan, the amount you can borrow is dependent on household income and where you live or study.

What other financial help is available?

You may also be eligible for other grants or bursaries if you are:

• Disabled
• From a low-income background
• Have children

You might also be awarded a scholarship depending on your academic achievements.

How many years of student finance do you get?

You can get funding for the duration of your first undergraduate course. You might also be eligible for an extra year of funding in certain circumstances, including:

• Failing a year and needing to retake
• Needing to pause your studies for personal reasons
• Changing course or university midway through

How do student loans differ from personal loans?

Student loans differ in a number of ways to a normal personal loan that you would get from your bank.

You apply for the loan through a government-owned organisation depending on where you are from or study in the UK.

• Students in England and Wales – Student Loans Company
• Students in Scotland use Students Awards Agency Scotland
• Those from Northern Ireland use Student Finance Northern Ireland

The loan is available to all eligible students. The amount that you repay each month is linked to how much you earn once you graduate.

Any money you have left on the loan is written off after 30 years or 40 years for new students starting after 1 August 2023.

Unlike a personal loan, taking out student finance won’t affect your credit record

Who is eligible for student finance?

Whether you qualify for student finance depends on your personal circumstances:

• Your university: it must be on a list of recognised bodies that can award a qualifying course
• The course: it must be awarded by a recognised institution and be on the list of recognised awards
• If you have studied a higher education course before: you might not be able to access student finance if you have been an undergraduate student previously
• Your age: you may get limited funding for the maintenance loan if you are over 60
• Your nationality or residency status: depending on where you live, you may be entitled to different support

What maintenance loan will I get?

Unlike tuition loans, the amount of money students get for living costs will depend on:

• Household income – the higher the earnings, the smaller the loan
• Where you are studying – if your university is in London, you will be entitled to a larger loan
• Whether you are studying at home or not – if you are living at home rather than in student accommodation then your maintenance loan will be smaller to reflect the lower outgoings

If you’re studying in England, the maximum annual maintenance loan you can get is currently £13,022, which is paid to students with an annual household income of £25,000 or less and who are living in London and away from home.

This reduces on a sliding scale so the minimum maintenance loan of £3,698. This is paid to students with a household income of £58,291 or more and who will be living at home.

What’s the minimum maintenance loan for students studying in England?

Student’s living circumstances	Household earnings threshold	Minimum maintenance loan
At home	£58,291	£3,698
Away from home and outside London	£62,343	£4,651
Away from home and in London	£70,040+	£6,485

What’s the maximum maintenance loan for students studying in England?

Student’s living circumstances	Household earnings threshold	Maximum maintenance loan
At home	Less than £25,000	£8,400
Away from home and outside London	Less than £25,000	£9,978
Away from home and in London	Less than £25,000	£13,022

Bear in mind that the earnings thresholds and the size of the maintenance loan will be different if you’re studying in Wales, Scotland or Northern Ireland.

For a full breakdown, check out savethestudent.org.

Do you have to declare parents’ income for student finance?

For the maintenance loan, yes. But not for the tuition loan.

If you live with your parents or a partner then they may be asked to contribute towards your support.

You need to give this information in order to receive all the help that you are entitled to.

What is the parental income threshold for student allowance?

The parental income threshold for the maintenance loan is considered the same as household income.

It is assumed that any shortfall in university or college costs will be covered by parents who can afford it, whether you are living at home while you are studying or not.

To get the maximum student loan, your household income must be less than £25,000.

The size of the loan then falls on a sliding scale, so the higher your household earnings the smaller the maintenance loan. The specific amount you will get will depend on where your university is based and whether you are living at home.

You can use the student finance calculator to estimate your maintenance loan.

What evidence do I need for student finance?

To apply for student finance you will need:

• Proof of identity such as a valid passport or birth certificate
• Evidence of household income and NI Number of parents (for maintenance loan)
• Course details, including length of course
• Evidence of children or disability if applying for extra grants

Will a maintenance loan cover all of my living costs?

The maintenance loan will probably not cover all of your outgoings, such as rent, bills, food and a social life.

On average:

• Student living costs amount to £924 a month (according to savethestudent.org)
• While the average maintenance loan is just £485 a month
• This leaves a shortfall of £439

Use this student finance calculator to estimate your maintenance loan.

The value of support for students’ living costs has fallen to its lowest level in seven years according to the Institute for Fiscal Studies, a think tank. This is because maintenance loans will fail to keep up with rising inflation.

Key points from the IFS analysis:

• Maintenance loans have increased at a rate of 2.8% for the 2023/24 academic year, which falls well short of consumer price inflation
• Students will be £1,500, or £100 per month, worse off than if the support had been linked to inflation
• As a result, even students entitled to maximum maintenance loans will have to make do with £1,000 less than they would earn working in a minimum wage job.

Unfortunately this means that many students have to find other ways of making up the shortfall in their living costs.

Other options to make up the extra money needed include:

• Bank of mum and dad
• Part-time work
• Obtaining a bursary
• Using a bank account overdraft
• Learning to budget

We outline ten money-saving challenges

How much can I earn before it affects my student finance?

All full-time students who are eligible can get some financial help through both the tuition fee and maintenance loans.

The size of the maintenance loan depends on your household income, which includes either your parents’ or partners’ earnings.

Remember: only taxable income is means-tested when applying for student finance.

However, the tuition loan is different as earnings don’t affect the amount you can borrow to cover university fees (in other words, you could get the maximum tuition loan regardless of your income).

Does student finance count as taxable income?

No, student loans do not count as taxable income in the UK.

This means it doesn’t count towards your personal allowance (which is the amount you can earn before you have to start paying tax on it).

What is the deadline to apply for student finance 2024?

The deadlines to apply for student finance for the 2023/2024 are as follows:

Students in England

• 17 May 2024 for new students 
• 21 June 2024 for returning students

Students in Wales

• 31 May 2024

Students in NI

• 31 May 2024

Students in Scotland

• 31 March 2024 for new and returning students

It can take up to six weeks to process payments so apply as early as possible. This will ensure that your finances are in place before the start of the new academic year.

Note: you can apply even if you don’t know what course you are doing or change your mind, just remember to update the application when you know.

Here’s a checklist to help you prepare for university.

Student grants, bursaries and scholarships

There may be even more financial support available to you, depending on your personal circumstances. The Scholarship Hub is an excellent place to start.

You won’t have to pay back grants, bursaries or scholarships. They are available:

• For academic, musical or sporting excellence
• Through companies or professional associations to attract talent to their industry
• Personal circumstances or financial needs
• Charitable grants: you can put your postcode, age and gender into Turn2us to see what is available

There are also more unusual sources of help too:

• The Vegetarian Charity’s grant – for all vegans and vegetarians aged 25 and under on educational courses
• The University of Roehampton offers up to 15 eSports scholarships of £1,500 a year to talented eSports players
• There are 150 Welsh language Coleg Cymraeg Cenedlaethol scholarships at Cardiff University worth £3,000 over three years.

There are also university and college hardship and financial support funds if you fall on difficult times. Check with your university to see what is available.

What are the five types of student loans?

There are five types of student loans in the UK.

The plan you are on will depend on:

• When you studied
• Where you are from (either England, Scotland, Wales, Northern Ireland, or the EU)
• And whether you are doing a postgraduate degree

Here are the four loan plans:

Loan plan	Applies to	Current interest rate	Earnings threshold to start paying off loan
Plan 1	Students who started university before September 2012	5%	Graduates have to pay back 9% of earnings above £1,834 a month (before tax)
Plan 2	Students who started a university course after September 2012	7.3%	Graduates have to pay 9% of earnings above a monthly income of £2,274 (before tax).
Plan 4	Students from Scotland or the EU who started their course in the UK after September 1998	5%	Graduates pay 9% of earnings above £2,305 a month
Plan 5	Students starting after August 2023	7.8%	Graduates pay 9% of earnings above £2,083
Postgrad	People who took out a postgraduate loan after August 2016	7.3%	Postgrads repay 6% of earnings above £1,750 a month

Find out how the interest is calculated here.

Here are the best student bank accounts according to our independent ratings.

Interest rates on student loans

If you are on Plan 2, the interest rate on your student loan is currently based on the retail price index, a measure of inflation, plus an extra 3%.

However, the Department for Education introduced a temporary cap for graduates on Plan 2 at the start of October 2021, bringing the rate down to 4.5%. This cap will increase to 6.3% from 1 September. Find out more here.

This is because commercial interest rates are lower than the interest rate you would otherwise be charged. The temporary interest rate cap is in place so you’re not disadvantaged.

The interest rate will be reviewed after three months and changed if necessary.

It’s worth noting that any increase in your student loan interest rate will not increase your monthly repayments.

Repaying your student loan

How much does student finance take per month?

The amount of student debt when you graduate does not represent what you will pay back.

If you don’t earn above the earnings threshold, you won’t have to pay back anything. You can see the earnings thresholds for the different plans in the table in the section above.

How much your monthly repayments are depends on:

• Your earnings after leaving university, plus interest
• Which loan plan you are on

For example, graduates on Plan 2 currently repay 9% of everything they earn above the current threshold repayment of £27,295 a year.

Here are some examples of how this works depending on the different earnings:

• £28,295 a year, you repay 9% on £1,000 = your repayment would be £90 a year (or £7.50 a month)
• £37,295 a year, you repay 9% on £10,000 = your repayment would be £900 a year (or £75 a month)
• £127,295 a year, you repay 9% on £100,000 = your repayment would be £9,000 a year (or £750 a month)

If you earn less than £27,295 a year you will pay nothing. 

Should you pay off your student loan early?

You can pay off your student loan more quickly by contacting the Student Loans Company. But is it a good idea?

Your student debt is wiped 30 years after you graduate, regardless of how much has been repaid.

As a result the majority of people don’t pay off their student loan during their working lives.

You can view your outstanding balance, statements and letters from Student Finance England.

We weigh up the pros and cons of paying back your student loan early here.

Should I prioritise paying back my student loan?

Some students are leaving university with eye-watering levels of debt. As a result, many parents and students are keen to pay is off.

Because the more interest that accumulates, the more you end up paying off in the long run, right?

Well, yes and no. 

• 83% won’t repay their student loan before it’s wiped after 30 years
• What you pay back goes up in line with earnings, so it’s more like a tax than debt
• Money from your parents may be better spent on a house deposit, a wedding or some other big life event
• Student loans are fundamentally different from commercial loans with protections for borrowers

One exception: if you are pretty certain you are set for a very high salary for most of your working life, paying off the loan in full early may be wise to avoid the extra interest.

A student loan repayment calculator will help you do the maths.

Flexible student loans

As part of a transformation of the student loan system, the government announced that all adults would have the opportunity to apply for a flexible student loan at any stage of their lives.

A “Lifelong Loan Entitlement” would enable anyone to access a four year loan in order to retrain or go to university or college to do a part-time or full-time student degree.

The measures were outlined in the Queen’s Speech on 11 May 2021 but there is no further detail as to when the new system will be introduced or how it would be structured.

If you’re weighing up your options, we can help you decide if a degree is worth it.

Student debt problems

Worryingly, the number of under-25s in debt is now much higher than in any other age group.

Unsecured debt, which includes payments on things like credit cards, has been increasing rapidly. It’s a good idea to manage this before it gets out of control.

Here are a few tips on managing debts (not including your tuition and maintenance loans):

• Rent and utility bills should be prioritised as you could be evicted or cut off
• Credit cards and overdrafts are expensive and can affect your credit rating
• Avoid payday loans, the interest rates are horrendous
• Beware of buy-now-pay-later as they can add up
• Check if your bank account offers an interest-free overdraft.
• Do not suffer in silence if you are struggling. Charities like StepChange and the National Debtline can help.

Have a look at our best buy tables for student bank accounts.

The Times Student Offer

As a student money can be tight, but that shouldn’t be a barrier to accessing great content.

That’s why The Times and The Sunday Times is introducing a new student subscription price – just £9.99 a year for three years.

You can find the offer below.

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