How your student loan will change in 2023

OM Personal Finance 2 years ago 2 min read

Choosing whether or not to go to university is a question for millions of teenagers each year. One of the biggest reasons for not going is the amount of debt you put yourself in at such a young age, without the guarantee of a job! Below explains exactly how the loan works.

What is a student loan?

A student loan is offered to all students attending university within the UK to help them fund their education. Student loans are split up into 2 categories, tuition fees and maintenance loans. In order to qualify for funding, you need to attend a recognised/ listed college or university on a full-time course.

Tuition fees are typically charged at £9,250 a year and paid directly to the university so you won’t see the money. Maintenance loans are paid into your bank to help you cover living costs while studying. They are means tested loans so the amount of receive depends on your circumstances. Your household income (usually your parent’s income) decides how much your maintenance loan will be. The system expects them to fund part of the living costs if they earn above a certain threshold.

How do the repayments work?

The majority of people will never actually pay back the full student loan. The way the repayments are set up means it is likely to be the best loan you ever take out. Currently, the amount you need to earn before you start paying any of it back stands at £27,295. 9% of everything earnt above this figure is payable. Interest is charged at a maximum of 3% above the retail price index (RPI).

After 30 years your loan will be considered paid off even if you haven’t paid a single penny back. The repayments are often seen as more of a tax than a debt, as they get written off at a certain point and the less you earn the less you have to pay back