Student Loans Explained

What is a student loan?

A student loan in the U.K. sense is money that the government offers mostly to undergraduates, but also to some teacher training students that do postgraduate courses, in order to pay for fees on the one hand and also living costs such as rent, food, and so on, on the other. However it's money that you have to eventually pay back to them.

Who is eligible for a student loan?

Eligibility for a student loan will depend on a few factors. One is whether or not your course attracts a student loan. Most undergraduate courses in the UK will, and also if you're getting a postgraduate certificate in education (a PGCE) then you'll be able to get a student loan as well. It will also partly depend on your age. In England, for example, loans for living costs are only available to students under the age of sixty at the time of applying for the loan. However, loans for fees are generally available to all. It will also partly depend on your residency status. You have to be eligible in terms of being in the UK for the last few years, and have settled status in the UK which is to say, basically, that you don't have restrictions on your passport. However, there are a lot of complicated issues that arise with residency. If you're uncertain at all about that, then you should speak to COSA, who are in charge of dealing with overseas students and are very good at advising on residency issues. Also, if you've done a course previous to the course you're wanting to do now (if you've already been in higher education), you might find that it is difficult to get student support, including a loan, for a further course. If that's the case you should speak to the funding body, such is the local authority, the student loans company, or the Student Awards Agency for Scotland, if you're uncertain.

Who processes the loans?

Student loans are processed by the student loans company. Your eligibility will be decided by a funding body, and they will send the loan out to you and arrange for its repayment once you've finished your course.

What is a career development loan?

It is a type of student loan that isn't operated by the student loans company but is available through one of three main high street banks: The Cooperative, The Royal Bank of Scotland, or Barclay's. You can get anything between £300 and £8,000 assuming you meet certain criteria, which include a credit rating. So, if you a have poor credit rating you might not be able to get one. It's basically provided for students who aren't able to get a mainstream loan for whatever reason. You can apply through those banks, and there's a website that gives more details as to how you apply and the conditions that relate to it. You repay that loan immediately following your graduation, and unlike mainstream student loans, the amount that you earn doesn't reduce or affect the amount that you repay. So, you should be aware that it is different to a student loan that most students get and there are some drawbacks.The website to get more information about career development loans is www.direct.gov.uck/cdl.

What's the difference between funding an undergraduate or postgraduate course?

Most postgraduate courses can't get a mainstream student loan and have to apply for a career development loan. The exception to that is a post graduate certificate of education - PGCE course - which attracts the same type of support as an undergraduate course in the main. You can get mainstream student loans for those.

How much can I receive?

This depends on a number of factors. Partly, it will depend on whether you get any grant. It might depend on your family income. It might depend on where you study, whether you're living with your parents or not, and so on. So, it's not easy to say exactly how much you might receive. However, for students outside of London who are studying away from home, the maximum that you might receive, for example, is £4,510 in the 2007-08 academic year.

How is a student loan better than getting a bank loan?

A student loan doesn't attract a real rate of interest. It attracts a rate of interest that's tied to the rate of inflation. At the moment, for example, it's 2.4 percent, so it will tend to be less expensive than a bank loan. Also, when you repay a student loan will depend on your income, rather than it having to be repaid in a number of instalments. For example, when you graduate, you don't pay anything back until you're earning £15,000 a year. Once you start paying back your student loan, it will be at 9 percent of income above that £15,000 level. For example, if you have a job that earns you £25,000, you will pay 9 percent of that (£2250) in the year.