What are student loans?

The term student loans relates to several types of financial assistance available to students to help support themselves while they are studying, to assist with living and accommodation expenses and course fees and related costs.

The most common type of student loans in the UK are those offered by the Government through The Student Loans Company (SLC) which is a UK public sector organisation established to provide financial services relating to loans and grants, to students in colleges and universities across England, Northern Ireland, Scotland and Wales.

To be eligible for a student loan or grant from the Government you need to be:

a UK National or have 'Settled Status' (i.e. there are no immigration restrictions on how long you can stay in the UK)
60 years of age or less when you start your course
completing your first higher education qualification or topping up a lower level higher education qualification

The University or College you attend, and the course you are completing also have to be eligible to enable you to qualify for government assistance with course fees and costs.

There are different application procedures and requirements depending on whether you are studying full or part-time. You will also need to make a new application for each year of your course, to adjust your loans up or down depending on your financial circumstances.

If you are studying full-time you can apply for two government student loans per academic year, these are:

Student Loan for Tuition Fees - in most cases this will cover your tuition fees in full.
Student Loan for Maintenance - towards accommodation and other living costs, the amount is dependent on your household income.

Government student loans work differently to bank loans in several ways, as shown in the table below:

	Student Loan	Bank Loan
Interest rate	Very low interest rate (student loans have a 1.5% interest rate as at 1 September 2010, this may increase if the Bank of England base rate changes but will not be higher than 4.4% up to 31 August 2011)	Higher interest rates
Repayment Time	Don't have to start repayments until the April after your course has finished (and only if you earn over £15,000)	Repayments due from date loan is drawn down
Repayment Amount	9% of your earnings over £15,000 (you can pay more if you want to repay the loan faster)	Agreed in advance with lender for usually a fixed amount
Managing the repayments	Automatically deducted from your salary by your employer before you receive your pay	You are responsible for setting up a direct debit from your bank account and ensuring sufficient funds are available to make the repayments

With a student loan the more you earn, the quicker you repay the loan. So, someone earning £18,000 a year (the average starting salary for a graduate-level job) will have to pay back nine per cent of £3,000 (£18,000 minus £15,000). This works out at around £5.19 a week.

Apart from being able to take advantage of the lowest lending rates you're ever likely to get, using Government loans and grants provides you with a level of support and assistance you don't get from banks and finance companies. For example, if you get a Student Loan for Tuition Fees this is paid directly to the University or College so you don't need to worry about paying your course fees. Likewise your Student Loan for Maintenance is paid directly into your bank account in three installments (one at the beginning of each term) to help you manage your income for the academic year.

In addition to student loans the UK Government provides several types of additional grants (one off payments which don't have to be paid back), as well as further financial assistance and support for students who, for example, are disabled, have dependent children or adults they care for or are suffering financial hardship.

Funding may also be available to students via other grants, scholarships and bursaries, which provide assistance to students on the basis of academic merit and/or financial need to enable them to attend higher education. These do not have to be paid back and are awarded by Universities, Colleges, Educational Trusts and Charities.

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