Student Loans
Student loans are primarily provided by the government to help cover the cost of higher education. These loans are essential for many students who need to pay their university tuition fees and maintenance costs (such as living expenses).
Types of Student Loans
There are two main types of student loans in the UK:
- Tuition Fee Loans: These cover the full cost of tuition and are paid directly to the university.
- Maintenance Loans: These are to help with living costs while studying and are paid directly into your bank account at the start of each term.
The amount you can borrow depends on various factors, including your university, the course you choose, and your family’s household income.
Eligibility Criteria
To qualify for a student loan in the UK, you must:
- Be a UK National or have settled status.
- Normally live in the UK.
- Be studying in a recognised UK university or college course.
Repayment Terms
Student loan repayment in the UK is contingent on your income, rather than the amount borrowed. After you graduate, you’ll only start repaying your loan once you earn above a specific threshold. This threshold varies depending on when you started our course:
- Plan 1: For students who started university between 1998 and 2011, and those since 1998 in Scotland and Northern Ireland. The current threshold is £20,195 (before tax and other deductions).
- Plan 2: For English and Welsh students who started university after 2012. The current threshold is £27,295.
Repayments are calculated at 9% of whatever you earn above the threshold.
For example, if you are on Plan 2 and you earn £30,000 a year, you will repay 9% of £2,705 (the difference between £30,000 and the £27,295 threshold), which amounts to about £243.45 annually, or approximately £20.29 a month.
Loan Interest
Interest on your student loan starts accruing from the day you receive your first payment. The interest rate is based on the Retail Index (RPI) plus up to 3%, depending on your income.
Loan Forgiveness
If you haven’t repaid your student loan in full after 30 years, any remaining debt is forgiven. This means it’s effectively written off, and you are no longer responsible for repaying it.
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