Student debt explained

Thinking about college or university but terrified of all that student loan debt? Find out more so you can make an informed decision that’s right for you.

woman with notebook, books and laptop

What’s available to help me pay for university?

There’s no getting away from it – unless you were born in a castle, you’re going to have to borrow money to go to uni. The main options are:

  • Tuition fee loan – pays your fees.
  • Maintenance loan – helps pay for your living costs.
  • Interest free overdraft – for emergencies, only if you’ve agreed it with your bank though! (scroll down for more on overdrafts).

Chec– do you qualify for free money?

If your family income is low you might qualify for grants or bursaries – you don’t have to pay these back. Check Turn2Us and Scholarship Search or ask Student Finance at your university. You’ll also be eligible for extra money if you are a parent, a carer or if you have a disability.

If you’re Welsh or from Northern Ireland you can usually get some of your maintenance loan as a grant. If you’re Scottish the government will pay your tuition fees too.

How do I pay back my student loans

You don’t start student loan repayments until you’ve finished your course and you’re earning over £21,000 a year (the repayment threshold). Then you pay 9% of anything you earn over £21,000.

So, for example, if you earn £23,000 that means you earn £2000 more than the threshold – so you would pay 9% of £2000 over a year, or around £180 a year (£15 a month).

If you take on extra shifts, work overtime or your hours go up, this means you’ll pay a bit more each month – but if your hours drop, so will your repayments.

What if I can’t find a job?

The idea is that you only pay when you can afford to. So you don’t make repayments if you can’t find a job, lose your job or if you’re ever earning less than £21,000 a year.

Some good and bad things about student loan debt: 

  • It won’t make it harder to borrow more in the future – it doesn’t affect your credit rating.
  • It won’t be a hassle to pay – it comes out of your salary before you see it.
  • You won’t ever be faced with a lump sum to pay.
  • You won’t have to pay it back when you’re unemployed or not earning much.

But…

  • It will mean that your monthly repayments go up as you earn more.
  • You will have interest added to the total debt each month.
  • You will probably have to pay your loan back even if you drop out of your course.

What about an ‘interest-free’ overdraft?

Banks often offer students interest free overdrafts – which means you have a bit of extra money as a safety net if you have a big expense, like having to travel home at short notice.

Beware that when you graduate, you’ll have to start paying interest – which could be a real shock if you’re not earning yet. Shop around to get the best graduate bank account deals.

And whatever you do, make sure you are using an AGREED overdraft. If you go overdrawn without agreeing it first, you’ll be charged.

Help with college fees under 18

Education is free if you’re under 18. But there are some grants to help with travel and other costs.

  • Education Maintenance Allowance (EMA) (in Wales, Scotland and Northern Ireland)
  • 16-19 Bursary Fund (in the UK)
  • Care to Learn (for parents under 20)
  • Other grants and bursaries depending on your situation

None of these need paying back.

Help with further education fees over 18

You’re looking at a loan, though there are some grants and bursaries available.

  • An Advanced Learner Loan is similar to a tuition fee or maintenance loan, and is paid back in the same way.
  • A Career Development Loan is a bank loan, although the interest is slightly less. You have to start paying it back one month after you finish your course, whether you’re earning or not.

But my granny said I should never get into debt! 

And that’s good advice, to a point. But there’s a massive difference between good debts (debts that help you move on in life and are easy to manage) and bad debts (debts that have huge levels of interest or were caused by buying stuff you don’t need). See our article about good and bad debt for more information.

Tuition, maintenance and advanced learner loans totally tick the ‘good debt’ box. If it helps, look at them more like tax than a debt.

I’still not sure university is worth it 

Try not to let the debt stress you out or be the only reason you decide not to become a student. On the other hand, if you know deep down that university is not for you, don’t worry – there are lots of other options.

More information

  • The Student Room is the largest student community in the world with a range of online resources to help you get through university.
  • Go to Money Advice Service for free and impartial money advice.