Today I would like to write about debt and student finance. I know, such a cheery topic. However, for the majority of students, debt is unfortunately something that can be unavoidable unless you have lots of money and can pay your tuition fees outright or have wealthy parents who pay your way (no hate, genuinely i think if your parents or yourself can afford the fees without loans, that is obviously the ideal situation to be in because you wont pay interest). I wish I didn’t have to use student finance, but I cannot afford to pay the extortionate fees that UK universities charge, so today I am going to talk about student debt and exactly what that means for you, how it all works and how paying it back works.
The main thing I want to do, is bust the myths and scaremongering around student loans and debt in England and hopefully, give you some hope and optimism about it all. This is a simplified guide to give you key facts, so if you want something far more in depth, i’d recommend going on to the government website or looking on an awesome website called money saving expert.
This advice is will be most accurate for full time English undergraduate students using Student Finance England. Please note that if you are a distance learning student (looking at you my fellow OU students), our loan process works totally differently to what I am writing about here, even if you study at “full time” intensity. I will be writing a separate blog post on financing Open University and Distance learning degrees so stay tuned!
Borrowing a loan from Student Finance
Undergraduates can apply for tuition fee loans and maintenance loans to pay for the costs of course fees and living costs, up to £9250 for publicly funded institutions in England, or up to £11,100 at an approved (fee cap) provider in England (as of 2019 onwards; check on the Gov website for the most up to date numbers). Fees work slightly differently for Wales, Scotland and Northern Ireland and I have no idea how that works, so I wont be going in to that during this post. Sorry guys!
Tuition fees are paid directly to your university, not to your bank account. For full time students, you do not start paying back your tuition fee until you have completed your studies and are earning above a certain amount. If you earn below this cap, then you will not pay any fees back until you do. When you pay your fees back, it comes out of your paychecks automatically like a tax, the same way things like your National Insurance contributions are taken.
Borrowing a maintenance loan
When I originally went to university, the maintenance loan was a grant and we didn’t have to pay it back (still had to pay back the tuition loan however). It is now a loan and the majority of students need to take out a maintenance loan in order to afford living costs and accommodation fees. The amount you are entitled to is based on your personal circumstances and you take it out and pay it back in the same way as a tuition fee loan. I am not going to go in to depth about how i feel regarding student finance and loans, but the price everything costs sits really uncomfortably with me, i don’t think its fair, but at the moment, it is what it is and most of us need it. You will also hopefully come to realise that it is not the amount your fees cost which is important, but actually the amount you will end up paying back and it is not nearly as bad as you think.
The amount you borrow is not always what you owe. Educate yourself about what you will actually pay back
What you repay depends on what you earn after university. The idea is that your degree will help you obtain a higher paying job. Now, we know that this is not exactly true in all cases, but it does mean that you wont repay anything if you gain nothing financially from your degree. If you are on a low income but are above the threshold to start paying back, you pay back a very small amount every month, like paying towards a phone contract. However, if you earn a lot, you will repay a lot more in proportion to your earnings. For everyone though, the debt is wiped after 30 years anyway! Many people will never pay back everything they borrowed, so please ignore headlines saying you are going to get into 50K of debt, because its simply not true for most of us.
Also, there is the expectation that parents will help students whilst they are at university. I find this part particularly annoying, because not all parents can afford this and unfortunately, some actively will not help their child. Some of us do not have people we can rely on at all financially and may even have people dependent on us financially; but in these circumstances there are additional bursaries and support available both from the government and your university- it is not much but every penny counts. This leads me on to my main piece of advice for prospective undergraduate students:
Save, save, save
If you are not yet at university, are a parent with children who may one day go to university or you are at university currently, please try and save as much money as you can and work really hard to find some sort of employment during your studies if you can. I know saving and finding a job can be really hard, but every £1 you save is £1 less that you have to borrow and owe, and believe me, £1 can be the difference between dropping in to an overdraft and getting in a cycle of borrowing compared to keeping your head above water. Anything you can put away for the future, do it.
Student loan debt is not even considered like a typical debt, so calling it debt is a bit clickbait-y
Having borrowed or owing money to student finance does not affect your credit rating (unless you intentionally skip payments, which is fairly hard to do because they take it automatically like income tax) and it does not affect finance applications, such as taking out a mortgage. It may come up on affordability checks, but this will look in to everything that you pay for each month and it shouldn’t make a difference if you are sensible with money. You are not going to be hounded by debt collectors and it wont appear on your credit file. It is debt, because money you owe is a debt, but it isn’t that sort of debt, if you know what i mean.
If you are really curious to get an idea what your loan will actually cost you, you can use this handy calculator on Money Saving Expert: Click Here.
If you want further information, watch this video:
I love Martin Lewis, I think he is a wonderful human who is helping people to become smart with their finances. He created this amazing video packed full of information, busting the student debt myths. I would encourage you to grab a cuppa, sit down with a notebook and absorb the information he is sharing as it is so helpful!
I hope this post has been helpful to you all! I am going to be writing a lot more about student money related issues and advice, so do subscribe to my blog to be notified of new posts! You can also head to my links page to find me elsewhere on the internet! Take care and start saving!