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Borrowing money as a student

Debt can feel like a negative thing, but it’s important to remember that not all debt is bad. For many people it’s a part of everyday life and only becomes a problem when it becomes too much to manage.

If you’re heading off to university it’s likely you’ll be considering applying for a student loan. To help, we’ve taken a look at your options for borrowing and explored some of the things you may want to know.

Student loans

During your time at university, you’ll have two main costs to cover – tuition fees and living expenses. A student loan may be available to help with both.

Tuition fees are usually paid directly to your course provider. These can often be much less if you’re on a placement year, or if studying abroad. 

A maintenance loan is to help with living costs such as rent, food and transport. It's usually paid directly to you to manage. If you’ve opened a student bank account, you can have your student maintenance loan paid into this. The amount you can get depends on your household income and where you’re studying.

There’s also some eligibility criteria you’ll need to meet in order to apply for a student loan. You can check whether you’re eligible on the gov.uk website. 

Postgraduate loans

If you’re going on to study for a Postgraduate Master’s Degree, you may be looking at ways you can fund this. Options include:

  • bursaries and grants
  • a studentship
  • with a loan
  • funding from your employer

If you’re taking out a Postgraduate Master’s Loan to help with course fees and living costs, the amount you get will depend on when your course starts. The same applies to a Postgraduate Doctoral Loan.

You can find out more about this on the gov.uk website, including what eligibility criteria you’ll need to meet to be able to apply.

When do you start repaying your student loan?

You’ll be expected to pay back your student loan, but not until after you’ve graduated and your income is over a certain amount. Things to bear in mind:

  • repayments will automatically be taken from your salary, along with income tax and National Insurance contributions
  • unlike other debts, repayments will stop if you lose your job
  • the earliest you'll start repaying your student loan will be the April after you graduate
  • depending on the student loan you have and where you studied, your loan may be cancelled after a certain amount of time1

You’ll need to start paying back a Postgraduate Loan when your income is over £1,750 a month or £404 a week. This is before tax and any other deductions. 

There’s also an option to make extra repayments or pay back your loan in full early if you want to and can afford to. 

When do you start paying interest on your student loan?

Interest is charged from the day you start receiving the loan until it’s repaid in full, or cancelled.

While you’re studying, the interest rate is based on the UK retail price index (RPI) plus 3%. After you graduate, it depends on how much you earn.

The interest rate may change depending on when you started your course. You can find out more about this on the gov.uk website.

Student overdrafts

Many banks have student bank accounts that may offer an interest-free arranged overdraft.

An arranged overdraft is an agreement that you can spend more money than you have available in your account, up to a limit. A student arranged overdraft limit will typically be between £1,000 and £3,000. This can vary depending on the bank and what year of study you’re in. If you’re unsure of your overdraft limit, contact your bank.

It’s important to check for any fees that you might be charged if you go over your arranged overdraft limit. This is known as an unarranged overdraft.

Be aware that you'll have to pay back what you’ve borrowed when you leave university. Speak to your bank about your student overdraft as they may be able to talk through any options you have for paying this back.

If you need further advice, you may want to speak to the National Association of Student Money Advisers (NASMA) or your Students’ Union welfare team. They may be able to guide you in the right direction.

Student credit cards

As a student it’s unlikely you’ll have a long track record of borrowing, so you may have a low credit score. This is what lenders use to help them determine whether or not to give you credit.

A student credit card could help you build up your credit rating, which could stand you in good stead for any future borrowing.

If you choose to take out a credit card and spend money on it, it’s important you never miss a repayment as it may harm your credit score if you do.

Student credit cards typically have a low credit limit to help people avoid getting into too much debt. But you should always try to pay off your balance in full each month so you won’t have to pay any interest on what you owe.

Explore more: How do credit cards work?

Where to find debt advice

If you need some support when it comes to your finances, there are places you can contact, such as:

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