Thousands of students across the UK are nervously waiting for their results day in August, to find out whether they will be starting their preferred university course in September.
According to UCAS, around 45 per cent of 18-year-olds have submitted their applications, as approximately 320,000 sixth formers applied for university so far, compared with 306,000 in 2021.
Thanks to surging inflation, to which student loan repayments are linked, those starting in September will be paying an initial 7.3 per cent interest on their borrowing.
It is therefore not surprising that some may be looking for alternative funding options ahead of the new school year.
The UK Government loans £20billion a year to English students in student finance, but this is predicted to rise as nearly 50% of 18 year olds applied to start university in 2022
How much is a university degree in the UK?
The UK paid students’ university tuition fees from 1962 to 1998, when Tony Blair’s Labour government introduced higher education fees.
The subsequent Teaching and Higher Education Act 1998 led to all UK students paying university tuition fees of up to £1,000 per year.
In 2006, the cap for tuition fees rose to £3,000 per year, and in 2012 it trebled to just over £9,000 per year.
Tuition fees vary between UK countries, as Scotland, Wales and Northern Ireland have devolved powers that allow them to make their own higher education laws.
In England: University tuition fees are capped at £9,250 per year for all UK and EU residents.
International fees vary, but can rise to £38,000 a year for medical degrees. Studying in London will also be significantly more expensive given the high cost of living.
In Scotland: University tuition is free for Scottish and EU residents.
Students from other UK countries pay up to £9,250 per year, though international fees vary.
In Wales: Tuition fees are capped at £9,000 per year for UK and EU residents.
Welsh students studying anywhere in the UK pay £3,900 per year and the Welsh government covers the remainder.
In Northern Ireland: Northern Irish residents and EU students pay £4,275 per year in university tuition fees.
Students from other UK countries pay up to £9,250 per year.
How do students typically cover the cost?
Tuition fee loans are available from the government for most UK students at UK universities.
Students can typically have the cost of their bachelors degree tuition covered, assuming they have not undertaken a degree previously.
These students will also get one additional year of funding to complete a masters degree, or a diploma such as a PGCE.
However, how much additional student finance support is available often depends on the university, the course, the student’s age, nationality or residency status, as well as their household income.
As well as having their tuition fees covered, students can get up to £9,700 in maintenance support per year if they live in student accommodation outside of London, or £12,600 in London – though this depends on their, or their parents’, income.
When do graduates start to pay loans back?
Repayments start either in the April after a student finishes their course, or as soon as they earn a higher salary than the current threshold.
For those with Plan 2 student loans (most graduates who started university after September 2012), this is currently £27,295 per year before tax.
When do you start repaying your student loan?
If you have a Plan 1 student loan: You’ll only repay when your income is over £388 a week, £1,682 a month or £20,195 a year (before tax and other deductions).
If you have a Plan 2 student loan: You’ll only repay when your income is over £524 a week, £2,274 a month or £27,295 a year (before tax and other deductions).
If you have a Plan 4 student loan: You’ll only repay when your income is over £487 a week, £2,114 a month or £25,375 a year (before tax and other deductions).
If you have a Postgraduate Loan plan: If you took out a Master’s Loan or a Doctoral Loan, you’ll only repay when your income is over £403 a week, £1,750 a month or £21,000 a year (before tax and other deductions).
They will repay 9 per cent of any earnings over the threshold, So if you earn £31,295, you’ll pay 9 per cent of £4,000 – which is £360 per year.
Plan 2 loans are written off 30 years after the borrower first becomes eligible to repay, though this is set to rise to 40 years for students beginning their course from September 2023.
Those on Plan 1 loans, who started university before September 2012, start to repay when their income hits £20,195 per year, and also pay 9 per cent of their earnings.
How much interest is charged?
Government figures revealed that by 2024, students will owe £8.6billion in interest alone on their student loans, almost double the collective debt they owe.
Graduates on Plan 1 pay interest in line with either the Retail Price Index or the Bank of England base rate plus 1 per cent, whichever is lower. Currently, they pay 1.5 per cent.
On Plan 2, graduates accrue interest at the RPI rate of inflation, currently 1.5 per cent, if their income is £27,295 or less.
If their income is £27,296 to £49,130 they pay RPI plus up to 3 per cent, and those earning over £49,130 pay RPI plus 3 per cent.
The latter is also true of students who are still at university.
The Department for Education said the maximum interest rate from this September is will be fixed at 7.3 per cent rather than the 12 per cent it would have reached, based on earlier inflation figures plus 3 per cent.
However, this is still far higher than the 4.5 per cent interest that students are currently charged.
Higher Education Minister Michelle Donelan said the level of the cap would provide ‘peace of mind for graduates’.
But the National Union of Students said the cap was ‘still cruelly high’.
The announcement from the government does not change the amount that borrowers repay each month, but rather how much interest will be accrued over the course of the repayments.
And, for students starting degree courses from 2023, the government has said the interest rate will be fixed at a lower level.
While most students opt for government loans to pay for tuition, there are other options from private loans to fundraising
What other funding options are available?
With interest high, some students may be considering other ways they could pay for their undergraduate degree – as well as those who may not be eligible for a student loan.
We outline some of the alternatives that they could consider.
Degree apprenticeships – Degree apprenticeships are a way to get a university degree without taking on thousands in debt.
Your employer the costs, so you end up with the same qualification you would have done if you went to university full time, but no student debt.
This could be an option for those who have taken a break between school and university and are working, or mature students.
It is worth finding out if there is a degree apprenticeship suitable for you, and discussing this with your employer.
However, note that some employers will require you to keep working for them for a certain period of time after earning your degree.
‘I’m glad I waited until I was working to get my degree’
Max Wilson finished his A-Levels in 2015, and decided to save up for his future degree while working full time.
He began working as a IT help desk assistant in Birmingham, and after one year in his job, his boss alerted him to the apprenticeship scheme which could help him earn his engineering degree without the large debt.
‘I always knew I wanted a degree, but I was scared that I’d never be able to pay it back, or even guarantee a job in my field,’ Max said.
‘When my boss told me about the scheme, I could have cried. It was exactly what I needed to progress my career without getting myself in a tricky financial situation down the line.
‘It took me four years of studying full time, and I continued to work nights on the help desk, but now I work as a data engineer, earning far more than I would have done without the support of my current organisation.
‘I’m so glad that I waited to start my degree, because now I don’t need to worry about mountains of debt and instead can just focus on myself and my career.’
Private student loans – If you can’t wait to earn the money for your degree, there are private companies which loan students money to pay their tuition fees and maintenance costs.
However, the repayment terms are not nearly as good – so anyone who is eligible for government support should take that instead.
Future Finance is considered to be the best private student loan option for students who cannot get the government loans.
Interest rates are higher, and graduates will have to repay the whole lot, regardless of what they end up earning, unlike the government loans.
Scholarships and bursaries – Most universities offer scholarships and bursaries to reward high academic achievement or support students in financial need. The money doesn’t need to be paid back, and some amount to thousands of pounds per year.
Eligibility is usually based on A-level grades or the students’ personal circumstances, such as being from a low-income background.
But there are also more niche awards available. For example, some universities offer them to those who excel at sports and agree to join the university team.
And there are also hundreds of small charities and trusts which give out grants to students each year based on their backgrounds and interests.
These are detailed in a publication called The Guide to Educational Grants, published each year by the Directory for Social Change, which is available in many schools and public libraries.
Students can speak to school teachers, or get in touch with the universities they are interested in directly, to discuss which scholarships or bursaries are available.
‘I don’t regret getting a private loan to pay for my degree’
Harry Campbell went to the University of Leeds to study Biology in 2013. He applied through student finance, but decided to drop out in January 2015 after his mum fell rapidly ill with dementia.
‘It was a really dark time, but I knew I did the right thing going back home to support her and my younger brothers,’ he said.
‘And when she died a year later, I was glad I got to spend so much time with her, where I otherwise would have been stressed about exams. It was tough, but it was the right decision.’
In 2017, Harry decided it was time to go back to university with the intention of studying the disease that took his mum from him.
‘But, since I already had a student loan, I wasn’t eligible for another, so I had to look at other options,’ Harry said.
‘I decided to take out a private loan with Future Finance, and while the interest rates aren’t great, I’m doing ok financially.
‘I’ve also just been accepted onto a PHD programme in Manchester to study the effects of Dementia on carers and family – something I never thought I’d be passionate about when I started studying in 2013.
‘I want to help support those who are going through what I did, and without my degree, I don’t know if that would have been possible.
‘I don’t regret getting a private loan to pay for my degree, as I know what my study partner and I are working towards is something that will help change lives.’
Fundraising – Another option instead of taking out a student loan is fundraising from family, friends or even complete strangers – though this is clearly risky so you should always have a plan B.
Some students have used fundraising platforms such as GoFundMe to successfully make some money to put towards their studies – though there are many more that have failed.
You could also sell your skills and give something back in return for donations that links to the skill you wish to develop at university.
For example, art students could sell their artworks, or dance or drama students could host fundraising events in their local community. The higher the donation, the better the reward.
Student loans vary based on the course and university, but could set students back more than £30,000 for a bachelors degree
Bank of Mum and Dad – If you come from a higher income background and are therefore not able to receive any financial support from the government for your degree, you may need to rely on support from your parents.
According to Stint’s The Student Sentiment Tracker, 60 per cent of students are still reliant on the ‘Bank of Mum and Dad’ to some extent, whether that means topping up their student loan with a small sum every month, or funding their whole degree.
If students’ parents are generous enough to pay their tuition fees, they could offer to pay them back once they are working as they would a government loan, or even work for them for free, as in our case study below.
‘It would have felt like a kick in the teeth’
Lucy Howard, a medical student studying in Newcastle was one student who was fortunate to have her parents to back her university degree.
She said: ‘I started studying in 2019, just before the pandemic began and I was forced to move back home, or risk getting stuck in my student accommodation on my own for the rest of course.
‘If I’d taken out loans to support my degree, it would have felt like a kick in the teeth having to pay it back despite moving back home.
‘But, since moving back to York, I have been working with my mum on her side business selling crochet, and put my ‘salary’ towards paying back my loan to my parents.
‘I know that not everyone is lucky to have parents like mine, but it’s peace of mind knowing I won’t need to pay the crazy interest rates for my degree, giving me more time to focus on my future.’
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