Understanding Student Loans: What You Need to Know

11th February 2025

Mark Barrow

If you’re thinking about university, student loans might seem complicated. You’ve probably heard different things from friends, family, and teachers about how they work.

Understanding student loans is essential if you’re heading to university in the UK. Tuition fees, maintenance loans, repayments, and interest rates all affect how much you borrow and how you pay it back. If you don’t know how student loans work, you could end up underestimating the cost or worrying unnecessarily about repayments. So, let’s cut through the confusion and look at what you actually need to know about student finance in the UK.

This guide explains everything you need to know about student loans in England, including how much you can borrow, when you need to start repaying, and what interest rates apply.

Understanding student loans in the UK – guide to tuition fees, maintenance loans, and repayments for university students.

Understanding the Different Types of Student Loans in the UK

Tuition Fee Loans

Understanding student loans is crucial, as they come in two parts: tuition fee loans and maintenance loans. Knowing each type will help you plan your university finances effectively. The first is your tuition fee loan. For students starting in 2025/26, this covers up to £9,535 per year. This money goes straight to your university to pay for your course, so you don’t have to think about it until after graduation.

Maintenance Loans and Living Costs

The second part is your maintenance loan. This is the money you’ll use for rent, food, books, and everything else you need while studying. Your location affects how much you get:

Living at home: up to £8,400
Studying in Liverpool or other cities (outside London): up to £9,978
Studying in London: up to £13,762

How Your Family Income Affects Your Loan

Your family’s income affects your maintenance loan amount. If your household income is below £25,000, you’ll get the maximum amount. Above that, the loan reduces gradually. When household income tops £62,000, you’ll get the minimum amount – about £3,698 if you’re living away from home outside London.

Student Loan Repayments Made Simple

Now for the bit everyone worries about – paying it back. The good news? You only start repaying when you’re earning enough money to manage it. For new students on Plan 5 loans (that’s you if you start uni from 2023 onwards), you’ll only pay once you earn over £25,000 a year.

How Much Will You Actually Pay?

Let’s make repayments clearer with real numbers. Say you get your first job after uni paying £30,000 a year:

You’re earning £5,000 over the threshold
You’ll pay 9% of that £5,000
That’s £450 per year, or £37.50 per month
It comes straight out of your salary, like tax

Interest Rates and Long-Term Planning

The interest rate on your loan is linked to RPI (Retail Price Index). For Plan 5 loans, you’ll pay RPI interest during and after your studies. Right now, that’s 4.3%. But don’t let that number worry you – remember, you only pay based on what you earn, not how much you owe.

UK university student calculating student loan repayments and budgeting for living expenses

How to Apply for Your Student Loan

Getting your loan is straightforward. Here’s what you need:

Your passport
National Insurance number
Bank details – this doesn’t have to be a Student Account, but it is a good idea to set one up before applying
University course details (can be your first choice)

Applications for 2025/26 open in March 2025. For full details and to start your application, visit www.gov.uk/student-finance.

Parent’s Role in Your Application

Your parents will need to provide their income details for your maintenance loan application. If they don’t want to share this information, you can still get a tuition fee loan and the minimum maintenance loan. But it’s worth having an open conversation with them about it, as it could affect how much support you receive.

Important Facts You Should Know

Here’s something many people don’t know: your loan gets written off after 40 years, regardless of how much you’ve paid back. Most graduates won’t repay the full amount before it’s written off, and that’s perfectly normal. That’s why you should think carefully before making extra payments – they might not save you money in the long run.

Next Steps in Your University Journey

To get ready for university:

Check your eligibility on the Student Finance England website
Mark March 2025 in your calendar for applications
Get your documents together early
Use the Student Finance Calculator to estimate your loan amount

Understanding student loans in the UK is essential for effectively managing your finances during and after university. You need to stay informed about the latest updates to make educated financial decisions. It’s important to keep track of deadlines, know how much you can borrow, and understand the repayment terms.

If you’re studying in Liverpool, check each university’s website for exact fees and loan details. The government’s Student Finance website is the best resource to keep up to date with the latest figures and application information.

Making informed decisions now will help you avoid unnecessary stress down the line. Keep your finances in order and focus on what matters most—your studies.

Frequently Asked Questions About Student Loans

When should I apply for student finance for 2025?

Applications open in March 2025. Submit your application by May/June 2025 (exact deadline TBC) to guarantee your money for the start of term. You can still apply up to 9 months after your course starts, but your money might be delayed.

Do student loans affect my credit score?

No. Student loans don’t appear on your credit file and won’t affect your ability to get a mortgage or other loans in the future. They’re completely separate from commercial loans.

What happens to my student loan if I drop out?

If you leave your course early, you’ll still need to repay the loan amount you’ve received. However, you’ll follow the same repayment rules – only paying back when you earn above the threshold. Contact Student Finance England immediately if you’re thinking of leaving your course.

Do I need to reapply for student finance each year?

Yes. You need to reapply for funding before each year of your course. The process is simpler after your first year as Student Finance England will already have most of your details.

Student Accommodation in Liverpool

Looking for a place to live while studying? That’s where we come in. At Luxury Student Homes, we help students find quality accommodation in Liverpool. We know the local area and understand student budgets.