How do I pay for university?

Around a third of prospective students worry about the cost of university and how they are going to pay for it, but if you really want to go, then the costs of university should not deter you

There is a lot of misconception about student loans and repayments and if you are concerned about the costs, making sure you understand how it all works should go some way to reassuring you that if you want to go to university you can.

So how do I pay for it?

Money from the Government – There are three main sources of funds from the government available to students:

  • A Tuition Fee Loan – this is a loan of up to £9,250 a year, made to you to pay for your tuition fees and it is paid directly to the University you will be attending. You have to pay the loan back.
  • A Maintenance Loan – this loan of up to £11,002 a year is intended to help towards your living costs whilst at University including accommodation. Everyone is entitled to a percentage of this loan, but to be eligible for the full amount you will be required to provide details of your household income. You have to pay the loan back.

Money from Universities – in addition to the money provided by the government, Universities have their own schemes which provide scholarships and bursaries to students. Some of these schemes are merit based and others are assessed on your financial needs.

Other Scholarships, Grants or Bursaries – These terms seem to be used fairly interchangeably and it can be confusing, but the basic principle of each is the same. The main thing to remember is that any money you receive as a scholarship, grant or bursary, does not need to be paid back. The difference lies in the reasons for which you are given the money. Often there are stipulations about how the money can be spent or conditions attached requiring specific commitments from you as the recipient.
There are a whole range of different funding opportunities which are not tied to a particular subject or university so do not limit your search to the university website.

How much will the loans cost me?

If you do take a loan it is important to understand how much it will cost you and how much you will need to pay back. Students are charged interest on their loans, but the amount you finally pay back depends on what you earn once you graduate and not how much you originally borrowed.

The loan is also cancelled after thirty years, so if you have not paid it all back within that time, you will be cleared of the debt. Current estimates suggest that around 40% of students will never pay of the full amount of the loan.

Here is a simple diagram of how student loan repayments work.
The important thing to realise is that whilst the thought of owing tens of thousands of pounds may seem incredibly daunting the repayments will always be 9% of what you are earning, a figure which has been fixed on to ensure that it is not going to take up a huge chunk of your earnings. It will also be deducted by your employer from your salary before you receive it so you won’t even miss it!

Will having such a huge loan affect my ability to buy a house?
Student loans do not affect your credit rating and therefore will not have an effect on your ability to get a mortgage. However, most lenders will look at your income vs your outgoings before lending you any money and so in that respect, the montly repayments to your student loan account will be considered when offering you a mortgage.

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