Managing your finances can be intimidating as a student. This is especially true if it’ll be your first time running your own financial affairs.

You’re likely to have expenses for tuition, accommodation, and living costs to take care of.

Sometimes, it can be challenging to make ends meet, and you might need to take out a loan to help you through this period of your life.

However, with so many options available to students these days, it can be hard to know where to start your research.

In this article, we’ll break down the loans which are available to students in Britain to help you make an informed decision about how to structure your funding for university.

Whether you’re a first-time borrower or a seasoned loan aficionado, this article will help you navigate the world of student loans.

Borrowing money as a student

Funding a university education is becoming more difficult thanks to the rising cost of living.

However, for many people, the benefits of going to university greatly outweigh the inflated cost, especially if you aspire to a career which requires a degree, and many do…

Thankfully, there are loads of avenues for student funding which are available to help would-be graduates get through university life.

Undergraduate student loans and grants from the government

Throughout your time as an undergrad, you generally have two big costs to cover – your tuition fees and your living expenses.

If you’re a British national, a naturalised citizen, or have the indefinite right to remain, a student loan or grant from the government should be available to help you out with both of these outgoings.

Paying fees

No matter which country you’re from within the UK, the government will front the cost for your undergrad tuition fees through either a loan, or a grant.

Normally, the funds are paid directly to your course provider, so you don’t need to worry about transferring the money to your university.

The vast majority of courses at mainstream universities are the same price for undergraduates – currently £9,250 per year – so the university you choose to go to will not impact the sum of your loan or grant in most cases.

The only exception is in Wales, where annual fees are set at £9,000 per year to study at universities across the country.

It’s important to be aware that the sum you receive can often be much less if you’re on an industry placement year, or if you choose to study abroad at any point during your course. 

However, this shouldn’t deter you from undertaking these enriching academic experiences, as there are separate routes to borrow cash to cover these periods in your degree, or your institution of choice may well cover your expenses.

Paying maintenance

The other component of the government loan or grant which you can apply for is called maintenance funding.

This is intended to help you out with your living expenses such as rent, food, and transport.

Unlike the fee component, your maintenance funding is usually paid directly to your bank account so you can manage it yourself and learn budgeting skills whilst you study.

In England, Wales, and Northern Ireland, maintenance funding is dispersed termly.

However, in Scotland, the funding is dispersed on a monthly basis in a lot of cases.

If you’ve decided to open a student bank account, you’ll be able to get your student maintenance loan or grant paid into it which can help you manage your budget until you receive your next funding instalment.

The amount of funding you can obtain will depend on your household income, where you’re from originally, and where you’ve chosen to study.

The government have a student finance calculator on their website, so you can input your specific circumstances to find out what you’re eligible for – nice and easy!

Postgraduate loans and funding

If you want to sign up for a postgraduate master’s course to top up your skills and knowledge from your first degree, there are different ways you can look to fund it.

Bursaries and grantsEducational institutions offer bursaries and grants to students who can either demonstrate exceptional academic credentials, or who wouldn’t be able to afford university unless they are offered financial assistance. You can apply for these direct with your education provider and will usually need to provide a transcript as part of the application.
StudentshipOn a similar vein to bursaries and grants, educational institutions offer studentships to those who can demonstrate exceptional academic attainment in relation to a specific area of study. However, these offers of funding are attached to a specific project in most cases, and you’re expected to make contributions to the relevant project in exchange for financial support.
With a loanMost permanent residents of the UK are eligible for master’s loans from the government to help with fees and maintenance costs. However, the sum varies depending on your nationality within the UK. For example, Welsh students can borrow a sum or apply for a grant which can cover both the fees and a large portion of maintenance costs, whereas English students only get enough to cover the cost of the course itself. Many non-Welsh students therefore access private bank or credit union loans to cover their expenses.
Funding from your employerMany employers, particularly those within the corporate public sector, big law, or financial services sector, will be willing to cover postgraduate education costs for their employees. Most of the time, the course you undertake will have to be related to your career progression. However, you can expect to get your fees paid and be offered a maintenance grant if you’re lucky enough to have an employer who will support you in this way.

How do government student loans get repaid in the UK? 

Student loans you receive from the UK government are set up to be repaid gradually over time.

Repayments usually get automatically deducted from your salary, and the repayment process will begin once you start earning over a certain threshold, but cease to be necessary if your salary ever dips below it.

This figure is currently set at £27,295 per year, and changes at the start of some financial years depending on inflation.

It’s therefore a good idea to watch out for any changes to this figure in the news, or on the government’s website. This way, you’ll know if you’ll be liable to make repayments.

Fortunately, if you earn less than the threshold, you aren’t required to make any repayments as the loans are designed to assist those on low incomes by removing the financial burden of repayment.

How much of my loan will I have to repay every month if I earn above the threshold?

When you pay your student loan back, you’ll normally be charged 9% of any income you’ve got which is above the threshold of £27,295.

For instance, if you earn £30,000 a year, you’ll repay 9% of the £2,705 difference between the designated threshold and the sum of your income.

This works out to be about £22 per month, so it’s a small dent in your pay check overall.

It’s worth noting that the interest rate which is attached your student loan will also hinge on whatever you get paid from work.

If your salary sits below the threshold, your loan amount will gather interest based on inflation.

However, if your salary is above the threshold, you’ll need to account for paying a variable interest rate which is linked to the Retail Price Index, in addition to inflation-based interest rates.

RPI typically ranges between 2.4% and 5.4% and, again, depends on your income. You can always call the student loans company to clarify your payments or get in touch with your bank, who may be able to advise you.

It’s important to bear in mind that if you’re paid through PAYE, student loan repayments are always automatic.

This means that you don’t need to worry about setting them up.

However, if you’re self-employed, you’ll have to organise manual repayments which are made direct to the Student Loans Company which serves your country.

It’s also worth remembering that you can make additional repayments whenever you like without incurring any penalties.

This can help you pay off your student loan quickly and works to reduce the amount of interest you’ll have to pay over the life of the loan, ultimately saving you money in the long run.

Can I get a student overdraft?

There might be times where your student loan doesn’t quite cut it and you’re in need of a bit of extra cash.

Fortunately, a lot of student bank accounts offer their customers an arranged overdraft which is interest-free for the duration of your study, and, in some cases, for a couple of years after.

This arrangement essentially means you can spend more cash than you have available in your bank account, up to a limit which is agreed between you and the bank in question.

Typically, arranged student overdrafts offer between £1,000 and £3,000 of interest-free cash.

However, this sum varies depending on the bank that you use, as well as what year of study you’re currently in whilst applying.

For example, some banks offer freshers a reduced overdraft which you can then upgrade later on in your studies.

If you’re unsure of what your overdraft limit could be, it’s best to get in touch with your bank and talk through your options.

It’s vitally important to make sure you’re aware of any fees you might get charged if you go over your arranged overdraft limit, as you don’t want to bring a nasty surprise upon yourself.

Going into an unarranged overdraft can be a costly error.

Whilst a student overdraft is a great deal for many, always remember that you’ll have to pay back the money in your student overdraft when you leave your course.

If you’re lucky, you might be given a fixed period to do this after graduating and your bank should be able to chat through this process with you. 

Unlike student loans from the government, there is no minimum threshold of earnings for paying back student overdrafts.

Consequently, however low your salary is after graduating, you’ll still be equally liable to make repayments to your bank. Always bear this in mind before you decide to take out a student overdraft.

Can I get a credit card as a student?

If you’re a student of the usual age and you went to university straight after school, it’s unlikely that you’ll have a comprehensive credit history as you won’t have had any chances to borrow money or take on credit as an adult.

Even if you haven’t done anything financially irresponsible, this may still mean you have a low credit score.

Your score is used by lenders to help them determine whether to give you any credit, so it’s important to keep it as high as possible at all times.

Thankfully, taking out a student credit card could help you build up your credit rating substantially, if you can manage your repayments responsibly.

Taking one out could stand you in good stead to borrow in the future, once you graduate.

This is useful as you never know what may happen after university. You may want to borrow money to buy a house, or a car, and both types of loan you’d take out for these purposes usually require you to have a good credit record.

If you do choose to take out a student credit card and spend the cash you have on it, it’s important to avoid missing a repayment as this might have an adverse impact on your credit score.

To help you out, student credit cards tend to have a low credit limit to reduce the amount of debt you take on whilst studying.

You should aim to pay off your balance every month, as this demonstrates good financial behaviour.

In addition, this means you won’t need to pay interest on what you owe to the bank or credit union, and you should have a tip top score by the time you graduate.

Can I get a personal loan as a student?

As I’m sure you’ll have guessed, it can be very challenging to get approved for a traditional personal loan if you’re a student.

This is largely due to the fact that personal loans normally require the applicant to have a regular income and good credit score.

Most students unfortunately won’t fit into these criteria.

However, that doesn’t mean you’re out of options.

There are other loan products available to students who need to borrow money for whatever reason.

For instance, certain lenders offer student-specific loans which are specially designed to cater for those still in the higher education system.

These loans will often come equipped with more flexible eligibility criteria than normal personal loans, and may not require a super high credit score, or a guarantor.

However, whilst you’re more likely to get approved for these loans, they might come with higher interest rates or other associated fees which you’re going to need to ensure you can cover.

It’s essential to compare a few lenders to find the best deal. It may also be worth re-assessing your budget to see if you can cut costs elsewhere, before taking on debt whilst you’re in full-time education.

Another option for you to consider could be a guarantor loan.

This involves asking a parent or other trusted person to co-sign the loan agreement you enter into with a lender.

As you may not have a very robust credit record, this can improve your chances of getting approved for a loan and may well result in the loan carrying lower interest rates than you’d pay otherwise.