Ten important facts about student finance

  • Don't let myths about fees put you off applying for higher education. Here are some facts to help you make an informed decision about going to university.

  • First time undergraduates' fees are automatically paid by a Student Loans Company loan. You may also be eligible for a maintenance loan of up to £8,700 to live off.
    You repay 9% of everything earned above £25,725 starting the April after graduation. Those who never earn over it, never repay.
    As monthly repayments depend only on earnings, the course fee size doesn't affect it.
    Whatever you still owe, repayments stop after 30 years.
    Repayments are taken via the payroll, just like tax. So you never actually handle the cash, meaning there will be no debt collectors chasing you!

    When you borrow from a bank for a credit card, loan or mortgage, to evaluate whether they'll make money from you lenders look at three pieces of information – your application form, any previous dealings they've had with you and crucially, the information on your credit reference files. 

    Most normal financial transactions and credit relationships you have are listed on these files – yet student loans are not included (with the exception of students who started university before 1998 under the original loans system and defaulted).

    So the only way loan, credit card or mortgage providers know if you've got a student loan is if they choose to ask on application forms. They can do this and it happens, but in general it's only for bigger value transactions such as mortgages.
    The bad news is that compared to today's graduates, you will repay less each year, have much bigger loans and pay higher interest (as much as inflation plus 3%), so it'll take much longer to repay than now and depending on earnings, may cost a lot more.
    Many graduates, even some of those starting on a salary of £25,000, won't repay everything owed within the 30 years (test your situation at https://www.gov.uk/student-finance-calculator) - so you may be repaying for much of your working life.
    Since many graduates won't fully repay tuition fees of £6,000 plus living loans before the 30 year wipe, it may not cost you any more to take a £9,000 course.
    Fears about fees mean some parents aim to pay them upfront. If you (or your parents) are planning to use savings, bear in mind that since you may end up not repaying all of what you borrow before the 30 year wipe, you could be throwing big money away. Using that money for a deposit on a house, for instance, could be a better use of it. Don’t make knee jerk decisions to pay upfront without doing research.

  • Information supplied by the Independent Taskforce on Student Finance Information.

    Need more mythbusting advice? Try this from MoneySavingExpert.com.