Loans and grants

Government student loans

Loans are divided into two categories:

  • Loans for fees
  • Loans for living expenses (maintenance costs)

Provided that they meet the requirements of eligibility, all UK students can receive a loan to cover 100% of their tuition fees. You apply for the loan through your Local Authority, and the money will be paid directly to the university.

Separate government loans for living expenses are also available to all eligible students, but they probably won't cover all your expenses. For 2009/10, the maximum loan for living costs has been set at £4950 per year (£6928 for students of London universities; £3838 for students living at home). The limit of the loans available to you is scaled according to your 'household income' – which, in most cases, means what your parents earn; the limit is also keyed to the grant that you might also receive (see below). Such maintenance loans are paid directly into a student's bank account.

Thus, all told, you could borrow more than £8000 per year (for tuition fees and living expenses) from the government. The terms are seductive: the interest rate is pegged by the governement in relation to the official bank rate and inflation rate (0% from September 2009) – far lower that the usual high-street rates. And you don't have to pay back a thing until after you have graduated and you begin earning more than £15,000. Then you have to start paying back your debt at the rate of 9% p.a. on all income in excess of the £15,000. Repayments are deducted directly from your income through PAYE.

So do the sums. If you've borrowed (say) £20,000 in your student days, and you manage to earn a salary of £20,000 after graduation, you'll be paying off your loan at £37.50 per month. In other words, at that rate it would take you about 50 years to pay it off in full. However, the government has promised that, if you have failed to pay off all your student loan after 25 years, the outstanding debt will simply be cancelled.

The government-owned Student Loans Company (SLC) is responsible for handing out loans, and applications are assessed by a branch of the SLC called Student Finance England (or the regional equivalents), in conjunction with the Local Authorities (see the websites listed under the heading 'Student finance').

Maintenance grants

There is further government help at hand to offset living costs. This comes in the form of grants, and the big advantage here is that, unlike loans, you don't have to pay anything back. The trouble is that they are means-tested, and awarded according to your household income.

So, for 2009/10, if your household income is less that £25,000 p.a., you can receive a maintenance grant of £2906 p.a. (the maximum available). If the household income is between £25,000 and £50,020, you can receive a 'partial grant', according to a sliding scale. So a household income of £30,000, should produce a grant of about £1906. No grants are available if the household income is higher than £50,020.

In addition, if you receive a grant, a limit is placed on how much you can borrow for your maintenance loan. The table for 2009/10 might look like this (in round figures; note that personal circumstances vary, and this may have an effect on the award):

Household income: £25,000 £30,000 £40,000 £50,000 £60,000
Maintenance grant: £2,900 £1,900 £700 £50 nil
Loan for maintenance: £3,500 £4,000 £4,600 £4,950 £3,564
Total per annum: £6,400 £5,900 £5,300 £5,000 £3,564

All these figures are likely to shift upwards in future to adjust to inflation.

Extra help is available to students with disabilities, or who have dependants to look after.

Grants are paid in three instalments, at the beginning of each term (as are the student loans). 

Bank loans

You can also borrow more money from the banks, of course.

Because they are very keen to sign up students for a lifetime as loyal customers, banks may offer various attractive inducements, including interest-free overdraft facilities, attractive loan rates and free gifts. Shop around for the best deal, and think of the long term (such as what happens to that free overdraft after you graduate).

Comments on this article

Lesley 5 May, 2010

can you get grants from studing from home

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