Understanding student finance
In England, students can apply for financial support for their first undergraduate degree through Student Finance England (SfE).
As a team, we hear the words ‘I can’t afford to go to HE’ or ‘We can’t afford to send my child to university’ a lot, and although we do understand that the idea of a ‘loan’ and paying over £9,000 a year can seem very off-putting and scary, we want to assure you that the Student Finance system is EXTREMELY different than any other loan scheme you will have heard of before, and we want to reassure you that, with this finance system, ANYONE can afford to go into higher education.
How does Student Finance work?
Watch this short video for a brief overview of student finance in England:
Higher education fees and costs
If a student starts a higher education course, there will be two costs associated with it:
- Tuition fees – the amount of money that students pay, per year, for a degree course. This cost is set by the institution and is currently set at a maximum of £9,250 per year of study. Fees vary depending on whether the course is full time or part time, or distance based. Fees also vary depending on how much the HEI spends supporting widening participation (WP) initiatives – like Gateways. HEIs can only charge higher fees if they spend a reasonable amount of their income and WP activities in their local community and with target WP groups. Higher tuition fees do not necessary mean a degree is better or harder to pass.
- Living costs – this is the amount of money that students need to live – including accommodation, travel, food, clothes and other essentials.
Although these are the costs associated with going into higher education, neither students nor their parents are expected to be able to pay for both tuition fees and living costs up front. Student Finance England is a service that provides financial support on behalf of the UK Government to students who are entering higher education in the UK. Students will therefore be able to apply for the following loans that will support them through higher education:
- A Tuition Fee Loan
- A Maintenance Loan
What is a Tuition Fee Loan?
A tuition fee loan is a non means-tested loan that covers a students’ full tuition fee for each year of their undergraduate study. This money will cover things like lectures, seminars, use of the library, use of equipment at the HEI, etc. This money is paid directly to the HEI, so a student will never the see the money or need to worry about missing a payment deadline. This money will need to be paid back. See the ‘Repayment’ section further down the page for more information.
What is a Maintenance Loan?
A maintenance loan is another form of loan that students can apply for, designed to help with their living costs during degree study, and will cover the costs of things like accommodation, travel, food and other essentials. Maintenance loans are paid in three (almost) equal instalments throughout the year – at the beginning of each term.
These loans are means-tested, which means that the amount a student can borrow depends on their family’s household income, (if pupils live at home with their parents or carers at the time they apply). This works on a sliding scale, so students whose household income is lower, will be eligible for a higher value maintenance loan, and vice versa. This ensures that students who need extra help will get that support.
Other elements that determine how much maintenance loan a student is eligible to receive are whether they will be living at home with their family or not, and whether they will be living/studying in or outside of London (to mirror the increased living costs in London).
| SFE HE Maintenance Loans available in England for the 2020/2021 academic year | |||
| Household Income | Living at home | Living away from home (Outside London) | Living away from home (In London) |
| Less than £25,000 | £7,747 | £9,203 | £12,010 |
| £30,000 | £7,095 | £8,544 | £11,340 |
| £35,000 | £6,442 | £7,884 | £10,670 |
| £40,000 | £5,789 | £7,225 | £10,000 |
| £45,000 | £5,137 | £6,565 | £9,330 |
| £50,000 | £4,484 | £5,905 | £8,659 |
| £55,000 | £3,831 | £5,246 | £7,989 |
| £60,000 | £3,410 | £4,586 | £7,319 |
| £65,000 | £3,410 | £4,289 | £6,649 |
| £69,977 | £3,410 | £4,289 | £5,981 |
How do repayments work for Student Finance?
Watch this video for a brief overview of student finance repayments:
The student loan repayment system is very different from any other loan repayment. This is why it is often likened to a ‘Graduate Tax’. Currently, students will only begin to pay back their student loan once they have graduated and are earning above the annual threshold of £25,725 (£2,143 a month/£494 a week), and this will automatically come out of their salary, so they don’t have to worry about paying it themselves (just like tax!). If their salary were to drop below this threshold, then the loan repayments will automatically stop. Students will only pay back 9% of what they earn above the threshold (so NOT 9% of their total income). The amount they pay back is always 9%, no matter how much they borrowed.
Repayment thresholds for student loans (post-2012)
| Annual income | Amount of income that repayments (9%) will be deducted from ie threshold (£25,725) minus annual income | |
| Up to £25,725 | £0 | |
| £30,000 | £4,275 | |
| £35,000 | £9,275 | |
| £45,000 | £19,275 | |
| £55,000 | £29,275 | |
| Source: https://www.which.co.uk/money/university-and-student-finance/student-finance/tuition-fees-and-student-finance-in-england-explained-a4hub1h0u46n | ||
After 30 years any debt that has not been paid will be written off, even if the student has not paid anything during that time. Studies show that approximately 17% of students will repay their student debt in full.
Although repayments only start once they are earning over the minimum threshold, they will be charged interest from the day they first receive their student loan. This is set at RPI (Retail Price Index) + 3% until the April after they have completed the course. After this, the interest will vary depending on what they’re earning.
Student loans do not affect credit ratings, because student loans are not included in a credit reference file. This means that it will not affect the likelihood of getting a mortgage. It is also worth noting that, because repayment is dealt with via your salary it is not possible to fall behind with payments.
Additional financial support
Many HEIs offer various forms of additional financial support particularly (but not exclusively) to students from lower income families. The most common examples are bursaries, scholarships, and grants that help with some or all of a student’s tuition fees or living costs. These do not have to be paid back. Some institutions offer fee or accommodation cost waivers rather than additional income opportunities.
- Scholarships – These are designed to help with some living costs or tuition fees, and are based on an achievement or excellence in academics, music or sport. These are offered by universities/colleges, employers or organisations.
- Bursaries – These are to help with some living costs as a one-off payment, and are based on low household income or personal circumstances (disabled students, students from particular religions or countries). They are offered by universities/colleges, employers or organisations.
- Grants – These are to help with some living costs, or for a specific purpose (e.g. studying abroad) and are based on low household income, background or personal circumstances. These are offered by charities or trusts that represent underrepresented groups.
- Fee or HEI provided accommodation waivers – offer a reduced tuition fee or accommodation costs. This discount is directly applied to fees or accommodation bill so the student never receives any additional income; instead they will have less money to pay back upon graduation for tuition fees, or they will have more money left as part of their maintenance loan because they are paying less or no rent. Accommodation waivers can only be used for staying in HEI provider owned or managed accommodation.
When applying to a higher education institution, pupils should always consider the financial support packages that they offer because all universities differ.
To find out about the financial support package that the University of Manchester offers, follow this link: https://www.manchester.ac.uk/study/undergraduate/student-finance/2020/uk/university-support/ or watch this webinar to get a deeper understanding of student finance at Manchester: https://www.manchester.ac.uk/study/undergraduate/manchester-live/
Outreach at the University of Manchester
Visit the University of Manchester’s Schools and Colleges webpages to find out about other outreach opportunities for and you school