Here we are at the end of August (and meteorological summer) and millions of students across the UK will be preparing for a new educational year; some 2m[1] of these are likely to be students preparing to return to, or start, their undergraduate degree at university.
Those students who have money put aside for their education costs or whose parents who have saved on their behalf for this event, may be considering whether to meet university costs from these savings or whether to apply for student financing, but what financing is available and how is it repaid?
Student Financing:
The subject of student financing for higher education has long been a subject for political debate with Labour’s 2024 manifesto ahead of the General Election stating:
“The current higher education funding settlement does not work for the taxpayer, universities, staff, or students. Labour will act to create a secure future for higher education and the opportunities it creates across the UK.”
While we cannot speculate what changes the new Labour Government may introduce to student financing, under existing legislation, the following financing is available to full time undergraduate students in England:
- Tuition fees Loan – to cover the cost of studies for a year up to £9,250; the loan amount is paid directly to the institution.
- Maintenance Loan – which provides money for living costs while at university including living accommodation, food, and essentials (like the odd night out!) This loan is paid to the student in instalments and the amount payable depends on whether the student is living at home or away, with a higher amount available to those studying in London. The amount payable is also means tested based on parental income. The minimum and maximum amounts are outlined below:
| Living Arrangements | Minimum Maintenance Loan | Maximum Maintenance Loan |
| Living at home | £3,790 | £8,102 |
| Away from home, outside of London | £4,767 | £9,672 |
| Away from home, studying in London | £6,647 | £12,367 |
Generally, a household income of around £58,000 per annum (£62,000 for those away from home outside of London) or more will result in a student receiving the minimum maintenance loan amount.
Repayment
So, I know from experience with my own children that those undergraduate years soon fly by and, before you know it, the university course is over and the prospect of repaying any student finance looms large!
The terms under which student finance is repaid depends on when the student started their studies. Students who started their higher education in 2023/24 or who are starting in 2024/25 will find themselves on ‘Plan 5’ which may result in them repaying any student finance loans sooner and for a longer period than those who entered higher education in earlier years.
Students are not expected to make repayments to their Plan 5 student loan until April 2026 at the earliest, even if they leave the course early. Repayments then start once their income is over the repayment threshold; the repayment threshold for the 2026-27 tax year will be £25,000 a year (or £2,083 per month).
The amount repaid is 9% of income over the threshold amount. On this basis, an individual earning £31,000 per annum (or £2,583 per month) would make a monthly repayment of £45. If income falls below the repayment threshold, repayments will stop and only restart when income is over the threshold again.
Plan 5 students’ loan amounts are currently subject to interest of 8% pa. Interest is charged from the day the first payment is made to the student or to the institution until the loan has been repaid in full or cancelled. Interest is added to the balance each month. The interest rate is usually set on 1 September each year, based on the Retail Price Index of the previous March.
Plan 5 loans are written off 40 years after the April the individual was first due to repay. This is a lot longer than some previous plans, so a bigger proportion of students on this plan are likely to pay off their Student Loans in full.
Full details of student financing, including the eligibility requirements and details of previous student funding plans together with funding available for post-graduate study or for students who are eligible for extra help can be found at: https://www.gov.uk/browse/education/student-finance
It is important to note that students studying in 2024/25 and accessing finance will have now missed the deadline for applying for finance. However, an application can still be made, though the minimum maintenance loan amount may be paid for the initial instalment, with a top up payment made (if applicable) paid as soon as household income details are processed.
Points to Consider
When considering the best method of funding university the following could provide some food for thought:
- Year-by-year consideration – the choice of student financing is not just a one-off consideration. The affordability of funding upfront or financing a year’s study and living costs can be considered annually as students apply for financing on an annual basis. Decisions can therefore be made based the parent / student situation at the time.
- Overpayment – rather than making standard payments and potentially retaining the borrowing over a longer period, students can overpay on the loan repaying at an earlier date. Again, the option of overpayment can be taken on an annual or ad hoc basis and can be based on potential earnings once the individual’s career path (and therefore the likely rate of repayment) is known.
- Other borrowing could be considered – parents or guardians could elect to take a personal loan over a shorter period removing the debt from the student.
- The current rules could change! Under Plan 5, students will potentially hold the debt for 43 years (with the loan written off 40 years after first repayment is due). This timeframe offers a lot of scope for legislation changes.
New 2024/25 Undergraduates
However their studies are funded, we hope that any new undergraduates in our Henwood Court client family enjoy all the opportunities and experiences that university life has to offer. Below are some links to sites that may prove useful ahead of ‘moving in day’:
UCAS: A list of Absolutely Everything You Need to Take to University or College:
Save the Student: Student Discounts 2024:
https://www.savethestudent.org/student-discounts
National Rail – 16-25 Railcard:
https://www.nationalrail.co.uk/tickets-railcards-offers/promotions/16-25-railcard/
Student Minds: Starting University:
https://www.studentminds.org.uk/startinguniversity.html
[1] Based on statistics from HESA which demonstrate 2.054 students were studying undergraduate degrees in the UK in 2022/23
