The full guide to student loans

How does student finance work? A common question with a surprisingly straightforward answer!

Moving to university is an exciting time, but it can present a few challenges. And when it comes to the finance side of things, with tuition fees, maintenance loans and budgeting to think about, you may be feeling a little out of your depth.

Don’t panic – we’re here to demystify the world of student finance and get you ready for life at university. 

In this student finance guide, we’ll cover everything from the basics and the different types of loans available to tips and tricks on managing your money as a student. 

Quickly find what you need in our guide:

How does student finance work? Let’s get down to the basics

Going to university isn’t cheap. In addition to covering the cost of your course, you also need to think about accommodation, living expenses and any books or supplies you might need.

That’s where student finance comes in. 

First, let’s break down the who’s, what’s, where’s and when’s…

Who can apply for student finance?

So, you’ve been accepted for a place on your dream course – congrats! Once you’ve decided which uni to go to and whether you’re staying at home or moving out, it’s time to sort out your finances. 

Despite all the confusing terms and conditions, student finance is more accessible than you might think. 

As long as you’re studying an approved course at a registered university or college, you should be able to get a tuition and maintenance loan. Simple! 

Before applying, you’ll need to check that you also meet the following criteria:

  • You’re a UK citizen or have a ‘settled’ status
  • You’ve been living in the UK for three years (prior to the start of your course)
  • This is your first degree (if you’re an undergraduate)

There are a few things that can affect the amount you’re eligible for:

What is a student loan?

In a nutshell, a student loan is the financial support available to students at university. There are two main elements to be aware of: a tuition fee loan for the course itself and a maintenance loan to help with the cost of living. 

The type and amount of student finance you are entitled to will usually depend on your household income, country of residence and whether you’re a full-time or part-time student.

  • For undergraduates: Undergraduate students should have access to tuition fee loans and maintenance loans, as well as any scholarships or grants (depending on your financial needs or academic achievement).
  • For part-time students: If you’re studying part-time, you should be able to apply for a loan to cover the cost of your tuition fees. This will be based on the number of credits or modules that you take. In some cases, you may also be eligible for a maintenance loan.
  • For postgraduates: Postgraduate loans often cover tuition fees, including any student scholarships or grants which will be based on academic merit or research proposals. If you are a postgraduate student, you won’t usually be entitled to a maintenance loan. 

How a student loan works – tuition fees vs maintenance loans

In simple terms, tuition fees are used to pay for your course while maintenance loans are used to pay for the day-to-day stuff, including rent, utility bills and the weekly food shop. 

The other main difference is who receives the loan. For tuition fees, the funds will be sent straight to the university. In comparison, maintenance loans are for you and will therefore be paid into your student bank account. 

What does a student loan cover?

In the UK, the average tuition fee loan is up to £9,250 a year. However, this may vary depending on where you’re choosing to study:

  • Scottish students go to university for free, but will have to pay the £9,250 fee elsewhere in the UK
  • If you go to university in Wales, it will cost you £9,000
  • Tuition fees in Northern Ireland are considerably lower, with students paying up to £4,710
  • If you are an international student, tuition fees can be much higher

Something to bear in mind: You have the option not to take out a tuition fee loan, but you will have to fund the course yourself, either through instalments or in one go. 

The maintenance loan that you are entitled to will depend on a few factors:

  • Overall household income (usually how much your parents earn)
  • If you’re studying in London, you will be entitled to a higher loan
  • Whether you’re living at home or in student accommodation
Maintenance loanAverage amountHousehold income
Minimum maintenance loan£3,698£58,291
Maximum maintenance loan£13,022Less than £25,000

As with tuition fees, this will be different if you’re studying in Scotland, Wales or Northern Ireland.

Useful tool: To get an idea of your maintenance loan, you can use an online student finance calculator

How does student finance work for a master’s degree?

You’ve finished university and decided you now want to stay on and study for a master’s degree. The good news is that you’ll be able to get financial support. 

Student finance for a masters works a bit differently from student finance for an undergraduate degree – we’ll talk you through it.

How does student finance work in the UK for postgraduate students?

If you’re starting a postgraduate master’s degree, you can apply for a loan of up to £12,167 (as of August 2023). This will be used to cover the cost of your tuition fees. The payments will be spread out in a series of instalments, throughout the duration of your course. 

Are you eligible?

Similar to finance for undergraduates, you’ll need to be studying at a registered university or college to be eligible. You will also need to be on a full postgraduate master’s course, such as a Master of Education (MEd) or a Master of Science (MSc). 

Where does student finance come from?

In the UK, the majority of student loans and grants are provided by the Student Loans Company, a government organisation. This includes both tuition fees and maintenance loans.

Are you entitled to additional funding?

Although a student loan will give you a decent amount, it may not be enough to get you through university, particularly if you have special circumstances. Fortunately, some students can access extra financial support, on top of the standard tuition fee and maintenance loan.

If you’re from a low-income household, you may be eligible for additional grants and bursaries to help cover your living expenses. 

If you have a disability, a long-term health condition, or specific learning difficulties, you may be entitled to the Disabled Student’s Allowance (DSA). This will provide funding for any equipment or other non-medical support.

If you have a child who depends on you, there are additional grants available. The Childcare Grant is there to help with childcare costs, whereas the Parents’ Learning Allowance will go towards the cost of your course. 

Can you get another year of funding?

Student finance will typically cover the duration of your undergraduate course – for most bachelor degrees, this can range from three to four years. A medical degree is a little different, spanning five to six years. 

In some circumstances, you may be entitled to an additional year of funding if:

  • You need to retake a year
  • You’re taking a break from your course due to personal reasons
  • You’re changing your course or university

Repaying your student loan

Unfortunately, like with any loan, the money is not yours to keep. Once you have completed your course, you will have to start repaying your student loan. 

Sounds scary, but you won’t be expected to pay it all back in one go. To make things as manageable as possible, the repayment of your loan is income-contingent. In other words, you will have to be earning a certain amount before you even qualify. 

A brief overview of the repayment process:

  • The amount you pay each month is typically a fixed percentage
  • The repayment will be automatically taken out of your monthly income
  • If you are self-employed, you will make any repayments through your self-assessment tax return
  • The current interest rate is 7.3% per year, until you’ve paid it all back
  • Your student loan will be written off if you haven’t been able to repay it over a certain time period

What changes have been made in 2023?

For those who are starting uni in 2024, there will be a lower repayment threshold. More specifically, you will need to be earning £25,000 per year, as opposed to £27,259. 

The time period you are given to repay your loan has also changed, increasing from 30 to 40 years. 

Applying for a student loan

Ready to get started? The quickest way to apply for student finance is through the government website. 

If you’re a new student, you’ll need to set up a student-finance account. If you’re a returning student, you simply need to log into your existing student finance account and go from there. 

Top tip: Create a strong password and secret answer that you can easily remember. You’ll be asked for these each time you log in, when you check the progress of your application and when you need to reapply for student finance.

You will need to provide some evidence 

For first-time students, you’ll be asked to fill out and submit an application. To make the process as easy as possible, you’ll need to have a few documents to hand:

Information needed from you:

You can provide proof of identity by entering your valid UK passport details. If this is not an option, you will need to provide one of the following:

  • A copy of your UK birth or adoption certificate
  • Original certificate of Naturalisation/Registration

It’s important to note that a UK driving licence won’t be accepted.

Information needed from your parents:

The amount of student finance that you’re entitled to will likely depend on your household income. In this case, your parents will need to provide Student Finance England with their income details and National Insurance number. 

If you’re a non-UK and non-EU national:

  • Original passport or Home Office biometric residence permit card
  • Proof of your residency status (for three years prior to the start of your course)

If you’re classed as an ‘independent student’:

For students who are considered financially independent from their parents, there’s a slightly different process. 

There are a number of circumstances that could classify you as independent:

  • A person under the age of 18 is dependent on you
  • You’re 25 years old +
  • You’re married or in a civil partnership 
  • Both your parents are deceased, they live outside of the EU or you’ve had no contact for over a year
  • You’ve been financially independent for three years prior to your course starting
  • When or after you turned 16, you’ve been in care for a three-month period 

The evidence you will need to support your application could be the following:

  • Marriage or civil partnership certificate
  • P60 or letter from employer
  • Child’s birth certificate
  • Letter from your local Jobcentre Plus/council/care authority

Setting up a student bank account

Once you’ve tackled the task of applying for student finance, you’ll need to set up a student bank account. This is because any payments from Student Finance will be sent to this type of account.

Designed exclusively for university students, there are a number of banks to choose from, each offering a range of benefits and features to support you. 

Even better, you can apply for a student account from the comfort of your sofa. Simply choose a bank and complete an online application on their website. 

Changed your mind? Found a better deal? No problem – you can switch to a different student bank account while you’re still on your course. 

What to consider:

Do you need an overdraft? Many banks will offer an interest-free overdraft facility, so it’s good to compare your options. This can act as a bit of a buffer for unexpected expenses, but don’t rely on this too much! 

It’s not free money and you’ll need to be aware of the repayment conditions, as well as the potential impact on your credit score. Although you probably won’t have to repay your overdraft as soon as you graduate, it’s important to plan ahead.

What incentives are you being offered? Whether it’s a free rail card, voucher or various discounts, banks will offer certain perks to persuade you to set up an account with them. Consider whether these are valuable to you.

Do you have easy access to mobile banking? Nowadays, it’s essential to have convenient mobile banking options. This enables you to keep a close eye on your balance, easily pay bills and more. 

What you’ll need:

  • A passport or driving licence
  • Proof of address (such as a utility bill)
  • Evidence to show that you’re a student (such as a UCAS offer letter)

It’s a good idea to open a student account ahead of starting your course. If you leave it until after your start date, your student loan may be delayed, leading to potential complications. 

Moving to university can be a big change – you won’t want to also be dealing with financial stress!

Get in touch with Student Finance

With a lot to think about, it’s understandable that you may be feeling a bit confused. Student Finance is the best place to go for any questions or queries – whether that’s about your application or any personal circumstances that could impact your loan. 

Remember, you’ll need to contact the right agency. This will depend on where you currently live or where your university is (if you’re moving elsewhere in the UK). 

Budgeting tips for students – How to make the most of your maintenance loan

Did you know that the average amount for student living costs is £924 (per month)?

Moving to university may well be your first taste of adult life. It’s only natural to feel excited when that first maintenance loan instalment comes into your account, giving you a sense of financial freedom. 

But don’t get carried away! With plenty of outgoings to juggle, including rent, utility bills, food and post-lecture pints, being able to manage your money is crucial. 

The average maintenance loan is around £485 a month, meaning it probably won’t be enough to comfortably cover all of your expenses. Some students are able to get help from their parents while others opt for a part-time job – it completely depends on your situation. 

One thing to be aware of is that your maintenance loan will be sent to your account in three instalments, so you’ll need to make it last for the whole term. Don’t spend it all during fresher’s week! 

The best way to handle your finances is by budgeting. 

Start with your incomings

Have a look at how much money you’ll have coming into your account. 

This can be anything from your student loan and any additional bursaries or grants to savings or income from a part-time job. 

Factor in your outgoings

The amount of money going out of your account will vary on a case-by-case basis. Here are a few factors to consider:

  • Are your bills included in your rent?
  • Will you have a car at uni or rely on public transport?
  • Do you like to meal-prep or are you partial to a take-away?
  • Will you need a gym membership or are you joining a uni club?

Get budgeting

Once you’ve reviewed your incomings and outgoings, you’ll need to create a realistic budget. Focus on your essential expenses first, like rent, bills and transportation, and then move on to the non-essential items. It’s no good having enough money for a night out if you can’t pay your rent for the next few months.

We recognise that budgeting can be hard, especially if you’re not the best when it comes to saving money. 

Follow our advice and you’ll be budgeting like a pro:

  1. Set spending limits and stick to them: This will help to ensure that you aren’t overspending
  2. Save ahead of time: You may find that your maintenance loan won’t come into your account until after you’ve started uni, so make sure you have some money in the meantime
  3. Cook at home: It doesn’t matter whether you’re a seasoned chef or have never even boiled pasta, there are plenty of easy online recipes and cookbooks for students
  4. Don’t impulse buy: Put that coat down and walk away! It might feel like you need it in the moment, but if it’s going to set you back financially, it isn’t an essential
  5. Review your spending habits: Although it might not seem like it, the odd coffee here and there can add up. Regularly reviewing your spending can help you to identify any areas where you might need to cut back or find a cheaper alternative
  6. Set some goals: These can be as big as a holiday or as small as creating an emergency fund (just in case)
  7. Become a savvy second-hand buyer: Whether it’s thrift shopping for clothes or hopping on eBay to find books for your course, buying second-hand is great for your bank account

 Top tip: Take advantage of student discounts! There are plenty of great deals out there, from railcards to savings on shopping and eating out. Be sure to have your student ID with you. 

Simplify student finance with Finance Rate

Finance doesn’t have to be such a scary subject and, with our comprehensive guide, you can now apply for a student loan with confidence – whatever your personal situation. 

Looking for more? We have a wealth of information on loans, including personal loans, car finance loans, guarantor loans and much much more. 

Anything you need, we’ve got you covered.