How do Students Loans work? [Student Loans and the Student Loan Company]

So you're thinking of studying and are wondering about financing it all, the Student Loans Company and Student Finance? Or perhaps more likely, your son or daughter wants to study and you are worried about the cost? Whatever situation you are in, the following guide to Student Loans will hopefully shed some light on common issues.

Student loans are now necessary for most people who want to study. After the government introduced so called top up fees a few years back, students now pay course fees of up to £3145 (2008/09 figure) per year straight to the university. However, the Student Loans company does not only provide loans for the purpose of course fees, it also allows students to take out a loan for living cost. To make sense of all this we will discuss both loans separately.

The first loan students can get is, as said, solely for the purpose of course fees. In fact students do not even get this money, but once applied for, these fees are paid directly to the university you decide to study at. Most people require to get this loan as course fees of over £3000 are not easy to just pay up front.

The additional loan students can get from the Student Loans Company, is a loan for maintenance purposes. Once again a loan like this is often necessary as local authority grants and a part-time job might not be enough to support you as a student. The amount you can get depends partly on the income of your parents. It works out that any student can apply for 75% of the available loan available. The remaining 25% is means tested. This is based on the household income of your parents. However, if you are married this will be based on the household income of you and your partner.

OK then, you got your loans. How about repaying them? And perhaps more importantly, how about the interest the Student Loans Company charges? Well to get the interest bit out of the way first, yes you do pay interest. But don't worry, we're not talking 100's of pounds of interest a year here. The interest you pay is only at the rate of inflation, which really is only fair as it ensures the Student Loan Company will be get back that what it actually borrowed you in real terms years later.

You don't start to pay back a student loan until you earn at least £15.000 a year. This all gets sorted by the Student Loans Company for you before you actually get your wage paid as it uses the UK tax system to claim the repayments. These repayments aren't really high neither. If for example you earned £21.000 a year, your weekly repayments would be around £10. The more you earn, the higher your repayments, however, they will be at an appropriate proportion to your income. And remember if you are studying and you use your time well to get a top notch degree, you can be assured of plenty of opportunities for you to get a well paid job!