Published On : Tue, Mar 24th, 2020

1 in 4 Students in the UK Depend on Loans to Get them By


With UK undergraduate tuition fees at £9250 and rising every year, in addition to the need for a maintenance loan, there is no wonder than 1 in 4 students depend on student loans to get them by. It is not unsurprising that University can be a very costly experience for many students and with the scrapping of the maintenance grant in 2016, the cost is only becoming a larger burden.

In the UK the maintenance loan for students in means-tested,depending on parental income. Students can borrow up to £7,747 if they live at home, £9,203 is they live away from home but outside London and up to £12,010 if they are living away from home in London. For many, particularly those with parental incomes falling in the middle of the pile, it can be a struggle as parents’ income is not able to supplement study and the maintenance loan barely covers basic living expenses. Of course, the answer to this may be to get a part-time job and many students do, but some Universities frown on getting a part-time job, even banning it completely. For example, at the rigorous institutions of Oxford and Cambridge, they ban students from undertaking part-time work entirely, owing to the fact that students should be solely focusing on their studies.

Fortunately, the maintenance loan can be just enough to get by for some and paying it back is not so aggressive as many other traditional loans. The UK government only requires you to pay back your loan after you start earning £25,000 or more, and you only pay a percentage above the £25,000 rather than your full income, this is generally 9%. Masters students are also able to get a loan of £10,000 to pay for tuition and other costs, which is paid back at a rate of 6%.

The problem with the government loan system is that, despite it being on a sort of “no win no fee” basis, owing to the fact that you won’t need to pay it back if you don’t achieve a “Degree-level” salary, it can create a gap between the working classes and other classes once the student has started their career. Imagine a more well off student graduating from University without any debt and a relatively stable safety net from the bank of Mum and Dad starting their working life compared to a working-class student who may have to pay 9% of their income above £25,000 to the government and who may have accrued personal loans in University due to low maintenance loans – it creates an unfortunate divide.

For many, this added pressure financially can cause students to seek out Private Loans to supplement their income. These loans, such as the ones offered by Future Finance are at a much higher interest rate of around 18.7% APR, regardless of your income. These work like traditional loans and can have a big impact on your credit score and future financial decisions. Keeping up with the rising costs of University can be a struggle for many and definitely impacts someone’s decision to attend University in the first place.