Student Loan System
As an international student or someone not well versed with the structure of UK student loans, it can be extremely confusing. You need to have a grasp of how it operates, what kinds of loans there are and how they are repaid. Here is an ultimate guide to understanding the UK student loan system.
Categories of Student Loans in the UK
In the UK ,Students are eligible for two main types of loans – tuition fee loans and maintenance loans. These are the loans that Student Finance England, or other regional authorities (Wales, Scotland or Northern Ireland) will give you depending on where your child lives.
A. Tuition Fee Loan
This award is designed to cover full tuition fees (which can be as high as £9,250 per year for home students in England). This is why tuition fees are usually higher for international students.
Repayment: The cost of tuition is paid directly to the university or school, by way of loan taken out by the student. This loan will not have to be repaid until the student has graduated and hits certain income thresholds.
B. Maintenance Loan
Function: Covers for living expenses, like rent, food, trip and books. The maintenance loan amount varies according to household income, where the student is living (at home or away) type and location of higher education institution as well.
Repayment: Maintenance loans can be repaid based on income, not right after graduation. They are collected through the tax system, usually as salary deductions like income tax.
UK Student Loans Eligibility
Whether someone is eligible for UK student loans will depend on their residency, the course of study, and where they live.
A. Residency Requirements
Home Students: For the student to be eligible as home student and apply for a student loan, they must be either a UK citizen or have settled status in the UK. In England, the qualifying student must have been ordinarily resident in the UK, EEA and Switzerland or Overseas Territories for three years before the first day of the course.
EU Students: EU students previously had access to loans, but eligibility rules have changed after Brexit. Access to loans and grants for courses starting after 2021 has been restricted to students from the EU who hold pre-settled or settled status in the UK.
International: The majority of international students are ineligible for UK government loans, but may look to private loans or help from the institution they will be attending.
B. Degree and University Requirements
Loans are for full-time students studying a degree level course (for example undergraduate, postgraduate or other higher education) at a UK university or college.
Loan Repayment Process
In the UK, student loan repayment is income-based and depends on which loan plan you have. Repayments start only after income is over a specific threshold, so it is affordable.
A. Monthly income limits and repayments
The repayment plans are numerous, but repayment only starts when the students in question earn over a fixed annual level of income. Here are the rules for Plan 2 loans (which are the most common type of loan if you started your course after 2012 in England) as at 2024:
Repayment Income Threshold: You only start repaying when you earn over £27,295 a year
Income-Contingent Repayment: Once above the threshold, borrowers owe 9% of their income above the threshold.
Loan Term: Any outstanding loan amount you might have after 40 years will be cancelled.
Repayment Plans:
Plan 1: For when you began university before 2012 (Typically applies in Scotland and Northern Ireland)
Plan 2 = students from England and Wales who began their studies after 2012.
Plan 4: New students in Scotland since 2012
B. Repayment Process
Those in employment will have the repayments automatically deducted from their salary under the PAYE (Pay As You Earn) system. Self-employed borrowers pay it back on their Self Assessment tax return.
Repayments are only required if a borrower’s income is above a certain threshold.
C. Interest Rates
During your studies and up to your graduation, interest is applied to the loan at a rate based on inflation (as determined by the Retail Price Index or RPI), plus an additional fixed percentage. It is a rate (asphalt) dependent upon income and when the loan was taken. Depending on your income, the interest rate might be RPI or even RPI + 3%.
Student Loan Forgiveness: What’s Up With That?
UK student loans are not the same as a typical loan since they offer forgiveness and write-offs.
Write-Off Time Line If none of the above apply, your loan will be written off after 40 years (25 if you are disabled).
Disablement: If the borrower is permanently unable to work due to a disability, they are eligible to have their loan forgiven.
Brexit influx influence passage on EU understudies
As a result of Brexit, EU students are not automatically eligible for student loans unless they have UK settled or pre-settled status. Minimum fees and access to loans may be different for EU students compared to UK citizens.
International Students May Str struggle to Repay
International students are mostly ineligible for government backed loans but can come up against hurdles such as:
International students pay high tuition fees
Not being able to work at part-time jobs exceeding the visa limits, which means that loan repayments will be more complicated.
No credit history in the UK therefore too difficult to get private loans
Private loans, scholarships or sponsorships which seem to be the only alternative options available for international students to manage their tuition fee and have a small account balance to maintain in their living expenses ledger.
How to Manage your Student Loans in the UK
Monitor Your Loan: Monitor your loan balance, payment summaries and interest rates via the Student Loan Center (SLC) website.
Start repayments earlier: You are encouraged to make additional payments on your loan while you are still studying, as doing so will lower the amount you have to repay overall (particularly with rising rates).
Keep an eye on repayment thresholds The income thresholds and associated rates are adjusted each year, so it pays to keep note of anything that may affect you moving forward.
Think about Refinancing (for international students): International students that have private loans might want to see if refinancing will offer them reduced interest rates or better terms for repayment.
What are the differences in the UK student loan system terms between England, Scotland, Wales, and Northern Ireland?
One of the headline differences is geographical, with the UK student loan system varying between England, Scotland, Wales and Northern Ireland in regard to eligibility for loans, repayment terms and levels of support available. Below is how it breaks down by region:
England
A. Loan Types
Tuition Fee Loans: Those in England can borrow up to £9,250 a year for tuition fees through public universities. The university gets the loan amount directly.
Maintenance Loans A means-tested loan dependent on the household income and living situation (living at home / away from home / in London). Maximum maintenance loan for away from home students is just under £9,700 (for 2024-2025).
B. Eligibility
Eligibility includes the students being resident in the UK (usually for at least three years prior to enrolment).
Before Brexit, EU students had access to student loans so long as they were about to begin a course before 2021, although this subsequently has been limited.
C. Repayment
Once you earn more than £27,295 a year your repayments begin.
You repay 9% of anything earned above the threshold.
After 40 years (or 25 years if the borrower is disabled), loans are cancelled.
The interest is related to inflation (Retail Price Index plus a percentage depending on your income)
Scotland
“Student Loan System in the UK — A Complete Guide”
A. Loan Types
Tuition Fee Loans: Students from Scotland do not pay tuition fees for undergraduate courses at Scottish universities. Instead, the government pays this through a tuition fee loan.
Maintenance Loans — Scottish students do receive maintenance support (Quotes are variable on household income). Yearly maximum for living away from home is about £7,000 (2024-2025)
B. Eligibility
For Scottish students to count as Scottish, they need to have been a resident of Scotland for at least three years before the start of their course.
Support has been limited post-Brexit for EU students, but there may be some qualifying criteria.
C. Repayment
Repayment only kicks in when you earn over £25,000 a year.
Repayments are 9% of anything you earn above the threshold.
It takes 40 years to have loans forgiven (or sooner as a result of death or extreme impairment).
Interest is pegged to inflation (Retail Price Index.
Wales
A. Loan Types
Tuition Fee Loans – Students from Wales can take out loan to cover costs with a maximum of £9,000 a year (lower than in England). This is the loan, which gets paid directly to the university.
Maintenance Loans: Welsh students are entitled to maintenance loans; the maximum amount available (for 2024-2025) for students living away from home is approximately £9,500 per year.) More help is available in the form of grants for those from less-advantaged backgrounds.
B. Eligibility
Welsh students are required to have resided in Wales for at least three years prior to embarking upon their course.
Students from the EU who began their courses in 2021 or later have lost access to loans unless they hold settled or pre-settled status.
C. Repayment
You start repaying it when you earn more than £27,295 a year.
The threshold is based on income, and repayments are 9% of earnings over this amount.
40 years after which debts are simply written off.
Interest is based on inflation (Retail Price Index + some percentage determined by income).
Northern Ireland
A. Loan Types
Tuition Fee Loans: Northern Irish students can take a loan for tuition fees of up to £4,530 per annum (less than the limit in England and Wales). The loan is paid directly to the university.
Maintenance Loans: Northern Irish students can also borrow a maintenance loan, albeit up to £7,000 per year (for the academic year 2024-2025). This depends on your household income.
B. Eligibility
To be classed as a Northern Irish student, students have to have been living in Northern Ireland for three years prior to when their course begins.
However, EU students who began courses prior to Brexit were able to apply for loans yet this has since changed for those starting after 2021.
C. Repayment
You start repaying the loan when you earn more than £27,295 a year.
Repayments are at 9% of income above the threshold
After 40 years loans are cancelled (or after 25 years if you become disabled).
The interest is connected to inflation (it is the Retail Price Index plus a proportion that depends on your pay)
Major Differences Between the Industrial Regions
Feature
England
Scotland
Wales
Northern Ireland
Tuition Fee Loan
Up to £9,250/year
Absence of Tuition Fees for Students from Scotland
Up to £9,000/year
Up to £4,530/year
Maintenance Loan
£9,700/year (depending on location)
Up to £7,000/year
Up to £9,500/year
Up to £7,000/year
Repayment Threshold
£27,295/year
£25,000/year
£27,295/year
£27,295/year
Interest Rate
RPI +0001 to 3000 PROFIT @ 0%; RPI + up to 3% if income dependent
RPI + a maximum of 3% (tiered by income)
RPI + up to 3% (depending on income)
CPI + RPI + a maximum + 3% of income
Repayment Percentage
9% above income threshold
Loan Write-Off Period
40 quarters or 25 quarters if disabled
Support for EU Students
Limited after Brexit
What are the differences between Tuition Fee Loans and Maintenance Loans?
Tuition Fee Loans and Maintenance Loans are two types of financial support for students available in the UK, both provided by the government, but different from each other. Here is a lowdown on the major differences:
Tuition Fee Loan:
What is the purpose: Cover tuition fees charged by universities or college.
Function: The fund is direct to the university or college for student.
Loan amount: The maximum loan size you can apply for is determined by your place of study (e.g., home students in England can receive up to £9,250 per annum). Tuition fees are fully covered by the government so Scottish students pay no such fees when studying at helm universities.
Maintenance Loan:
Aim: To assist students with their living expenses such as rent, food, travel and books while they are studying.
Douse: The student receives the loan directly to pay for living expenses.
Value: Amount depends on household income household type; whether the student lives in at home or away from home, whether they study in London or not. This is the most that can be borrowed, which could be anywhere between £4,000 and £9,700 (for home students in England).
Loan Amount
Tuition Fee Loan:
The loan amount is generally determined as a function of the university tuition fees charged, up to a country specific maximum fee.
In England, for full-time students at public universities, the maximum tuition fee loan is £9,250 a year.
Scottish students studying in Scotland do not need to pay tuition fees (no fee loan), while other UK and international students may be chargeable.
Maintenance Loan:
Students are able to borrow different amounts depending on their household income, where they live and study.
For students who will be living away from home (outside of London) the maximum loan in England is currently £9,700 per year; for those living in London there are additional allowances.
Repayment Terms
Tuition Fee Loan:
Tuition fee loan repayment is income based but directly tied to the graduates earnings.
The loan is repaid automatically via salary deductions once the borrower earns above a certain threshold (for example, £27,295 annually in England).
Repayments are generally 9% of income exceeding the threshold.
The loan is forgiven after 40 years (or sooner if the borrower becomes disabled or dies).
Maintenance Loan:
Paying them back: Similar to tuition fee loans, maintenance loans are also repaid relative to a person’s income but they are integrated into the same overall loan payment system.
Post-graduation, when the student earns above the same income threshold level as is required for repayment of the maintenance loan, they start paying it back.
The repayment terms are similar, with 9% of any income above the threshold allocated toward a repayment.
The loan is cancelled after 40 years, or earlier if you die or become seriously disabled.
Interest Rates
Tuition Fee Loan:
Meaning, that interest is applied on the balance of the tuition fee loan, which is determined by Retail Price Index (RPI) with additional percentage according to earning an individual makes.
This might mean that the higher a borrowers income, the more they will pay, for example, on an income over £49,000 per year you could be charged as much as RPI + 3%.
This means interest is calculated every year, and the loan balance grows as new interest is added.
Maintenance Loan:
Maintenance loans work similarly to tuition fee loans, as they are also charged interest at RPI plus a margin dependent on the income of the borrower.
You pay interest on maintenance loans as you do tuition fee loans, and the overall balance builds up.
Loan Disbursement
Tuition Fee Loan:
Students do not pay the loan directly — it is paid directly to the university or college. Full tuition fees will be covered, although anyone attending a more expensive university is responsible for the difference (with some funding options available).
Maintenance Loan:
The loan is directly paid into student hands, usually in three portions (one per term). You can use it for any living costs like rent, food, books, travel etc.
Availability Depending On Living Conditions
Tuition Fee Loan:
Regardless of residence, available to any student who qualifies. This loan depends on the amount of tuition fees being charged by the university so it does not take into account whether a student lives in international or home situation.
Maintenance Loan:
Loan amounts different based on whether they’re living at home/away from home/or in London. For instance:
Students who study away from home usually get a higher maintenance loan.
Students who live at home get a reduced maintenance loan.
Key Differences Summary Table
Feature
Tuition Fee Loan
Maintenance Loan
Purpose
Covers tuition fees
Addresses basic human needs (eg. rent, food, transport)
Loan Amount
Capped from tuition, with a maximum of £9,250 per annum
Depending on income, living situation (up to £9,700 a year in England)
Repayment
According to income, commencing after a certain amount of earnings (e.g., £27,295)
Just like aloud (tuition fee loan), income driven
Interest Rate
RPI + additional 3% linked to income
RPI + up to three per cent according to income
Loan Disbursement
Paid for directly to the university
Paid directly to the student
Loan Forgiveness
Cancelled after 40 years or earlier if disabled
Ceased duty after 40 years or sooner if incapacitated
Availability
Available to All Students Who Qualify
Dependent upon living situation (home, away)
What household income gets what loan amounts?
UK Maintenance Loans are income-assessed by the household of the student’s parent(s) or guardian(s), if they are under 25 and living with their parents, or their own if they’re 25 or older (or living independently). Household income is one of the major pieces of information the government takes into account when determining a student base living-cost assistance amount.
So we broke down how household income affects the size of maintenance loans:
Household Income Thresholds
A students household income and the circumstances of their living away from home situation (living at home / outside / in London) will determine just how much he or she receives as Maintenance Loan. Every year, the government establishes income thresholds and future graduates from wealthier households are offered a lower loan amount.
Determine How Much You Can Borrow
Family Income: The income of the student’s parents or guardians (or partner if applicable). If the student is living on their own, only their income will be evaluated.
Hometown: The loan amount varies depending on whether the student lives:
At home with parents
Living elsewhere, studying outside London
Studying in London, away from home
Income Bands
There are income bands structured around your household income which dictate the amount of maintenance loan you receive. This works on a sliding scale, where a higher income means less maintenance loan as it is assumed that an income that high family can afford to help out more with accommodation and other cost of living expenses.
Full Maintenance Loan According to Where you Live
The amount of maintenance loan a student can get is determined by wherever they will be living during their course:
Students Living at Home: For students living at home, loans given are usually the lowest. The maximum loan for living at home is about £4,000 a year in England in 2024-2025.
Living Away from Home (outside London): For students living away from home000sample, outside London the amount of loan is higher. In 2024–2025, the most you can borrow is about £9,400.
Students Living Out (in London): Students studying away from home in the capital can qualify for larger maintenance loans due to the increased cost of living. The upper limit for 2024-2025 is £12,000
Line Items The data is collected based on number of households and loan amounts.
They can accessed the full maintenance loan if they are from a low household income family. The maintenance loan begins to taper off as household income rises; likewise, the expectation is that a family will contribute more toward a student’s living expenses.
Example (England 2024-2025):
If your household income is under £25,000: You can receive the maximum maintenance loan (depending on where you live).
Household income of £25,000-£40,000The maintenance loan reduces on a sliding scale as household income rises.
Household Income over £40,000: Students from higher-income households will receive a much lower loan. The maintenance provided will vary for each student; a student living locally and away from home could expect around £4,000-£6,000 in support.
How Amounts for Maintenance Loan Rage by Income are Divided (for 2024-25 example)
Household Income
Living at Home
Living Away (Outside London)
Living Away (In London)
Under £25,000
£4,000
£9,400
£12,000
£25,000 – £30,000
£3,500
£8,900
£11,500
£30,000 – £35,000
£3,000
£8,400
£11,000
£35,000 – £40,000
£2,500
£7,900
£10,500
£40,000 – £45,000
£2,000
£7,400
£10,000
£45,000 – £50,000
£1,500
£6,900
£9,500
£50,000 – £55,000
£1,000
£6,400
£9,000
Above £55,000
£0
£5,500
£8,500
Exceptions for Students Who Are Living Independently
For all other students with a family income up to £59,999 which the EFC is set at during the assessment, if they are aged over 25 or in independent living then it will be based on their own salary as opposed to that of their family for establishing entitlement loans.
Those students who have been in care or are otherwise self-supporting will get the full loan with no reference to parental income.
Household Income: How The Government Sees It
The government takes the amount of the total taxable income of both parents or guardians of the student from the previous tax year (usually around April). This includes:
Wages and salaries
Pensions
i) Income from investments (dividends, interest, rental income etc.)
Please tick any benefits that you are already claiming (for example Universal Credit, Entitlement to Housing Benefit)
Other taxable forms of income
The government is going to request documentation, like tax returns, to confirm the household income.
What do we do if there is a change in household income?
A household income review may be needed — students are entitled to apply for an income review if a household member’s income varies significantly during the academic year (e.g. a major loss of employment).
In addition, any changes in income should always be reported to the student loan company immediately.
Wondering how much you’ll pay back and when and how interest will be incurred?
UK Student Loans Repayment threshold?
The repayment threshold is the amount of income you have to exceed before having to start repaying your student loan. Threshold, which is based on your post-graduation income and updated by the government every year.
If you have a Plan 2 loan, your repayment threshold in England is currently £27,295 per year (£2,274/month or £524/week) (2024/2025 tax year), so repayments don’t start until after you’ve earned above that amount.
Repayment Threshold: If your income is less than the threshold, you do not have to pay anything in that tax year.
Changes to the Income Threshold: This is assessed annually and rises with inflation (as measured by the RPI).
The threshold will vary for loans taken out under other repayment plans (e.g., Plan 1 or Postgraduate Loans), e.g.
Plan 1 (for loans taken out before 2012) has a lower threshold, which tends to be around £22,000 a year.
The repayment threshold for Postgraduate Loans is different and generally £21,000 a year.
How Repayments Work
They are repaid as a percentage of your income over the threshold, not based on how much total you borrowed. It is usually 9% of your income above the threshold that you repay.
Example Repayment Calculation (Plan 2, England):
Income over the threshold: If you earn £30,000 a year, this means that your income is £2,705 above the repayment threshold of £27,295.
To pay back: 9% of £2,705 = (£243.45) a year
If you are employed, this repayment will be taken as a portion of your income through the Pay As You Earn (PAYE) system.
Interest on Student Loans
Student loan interest works on a sliding scale linked to both your income and the rate of inflation (Retail Price Index, RPI). Linea Interest is charged yearly and affects how the loan grows over time.
How Interest is Calculated:
The interest rate is determined by your earnings and is capped at RPI + 3% (if you earn above a certain threshold).
If you earn less than £25,000: Base Rate = RPI (from the preceding March.)
For earnings between £25,000 and £49,130: The interest rate increases from RPI to RPI + 3% on a gradual basis as your income increases.
Above £49,130: The interest rate is set at RPI + 3%.
Example Interest Calculation:
2024 RPI = 8.2% (March 2024)
An interest rate of RPI + 8.2% would apply to income below £22,000.
So if your salary was £50,000 that interest rate would be limited to RPI + 3% meaning an APR of 8.2% + 3%=11.2%.
Interest Accumulation:
This extra loan is applied as interest on your outstanding loan balance every year during the anniversary of when you acquired it. That means your loan balance can grow over time because interest is added to the principal. Those with higher levels of income will see their interest rated go up, but this is capped at RPI + 3%.
Key Takeaways on Repayment and Interest
Repayment Threshold: You start paying back your student loan only when you are earning above the threshold. Any earnings above that amount and you will pay back a percentage of your income.
Interest – based on your earnings and the rate of inflation (RPI) Depending on your income, it can be RPI — up to RPI + 3%.
Make Repayments in Relation to the Income You Make: It will only charge you a percentage of the amount over a certain given threshold.
Loan Forgiveness — The remaining balance on the loan is forgiven after the end of the loan term (usually 40 years from when you took out your loan) if you haven’t repaid it in full.
How to get Best Education Loan?
What is Business Loan /How to get Business Loan? and Types of Business Loan.
